Empresas Copec SA
SGO:COPEC
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
5 740
7 811
|
| Price Target |
|
We'll email you a reminder when the closing price reaches CLP.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
You don't have any saved screeners yet
Good day, everyone, and welcome to Empresas Copec's Fourth Quarter 2018 Results Conference Call. Today's presentation and the fourth quarter 2018 earnings release are available on the company's website at www.empresascopec.cl and also on our Investor Relations website at investor.empresascopec.cl.
Before we begin, I would like to remind you that this presentation may include market outlooks and forward-looking statements, which are based off the beliefs and assumptions of Empresas Copec's management and on the information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and, therefore, depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Empresas Copec and could cause results to differ materially from those expressed in such forward-looking statements.
This presentation contains certain performance measures that have been adjusted with respect to the IFRS definitions, such as EBITDA. Please note this event is being recorded. I would now like to turn the conference over to Mr. Rodrigo Huidobro, Chief Financial Officer of Empresas Copec. Please go ahead, sir.
Okay. Thank you very much. Good afternoon, everyone. Thank you for joining us. We will be taking a look at the numbers, the results and the most important developments of the last quarter 2018. In order to do that, I'm joined here today by our IR department, led by Mr. Cristián Palacios, and also by the finance division at Arauco, led by Mr. Gianfranco Truffello.
So let's get started. If we go on to Page 4. We are placing the results of the last quarter in a historical context. You can see here that EBITDA amounts to $564 million, which is down with respect to what we were recording over the last 2 quarters, but it's up with respect to the EBITDA we got last year in the fourth quarter. Same thing with net income, $148 million, which is down with respect to the third quarter, but it's more than what we got in the fourth quarter last year.
So just -- the main reason for this as we will see further on has to do with the drop in sales in our forestry division in -- at Arauco basically -- in all products in Arauco, particularly, pulp as we will see going forward.
Just a brief mention of the accumulated numbers for the year. We have recorded an EBITDA of $2.8 billion, which is the highest EBITDA in our history. And we have got up to a total net income for the year of almost $1.1 billion, which is also a record historical figure for Empresas Copec. So all in all, a very good year with a very good performance at Arauco with record pulp prices during most of the year and also a very solid performance for fuels unit.
If we move on to Page 5. We are showing the main components of EBITDA and also the main variations with respect to the fourth quarter, 2017. You can see here that the main increase in EBITDA comes from Copec, and that basically stems from higher margins in our fuels business in Chile as well as in the U.S. through Medco. Together with that, we are seeing better margins in general and basically across all countries in Abastible. That, to some extent, is offset by a drop in Arauco, which as we will see further on has to do with a drop in sales.
Regarding the composition of EBITDA, this is pretty much in line with our historical figures. You have most EBITDA being generated at Arauco and our fuels divisions. Regarding net income, which is shown on Page 6, we can see that the main increase once again is related to Copec, and that has to do with the operational increase that we already commented, plus some nonoperational effects, which are -- many of them nonrecurring and which we will explain further on. That is followed by an increase in our fishing division in Igemar related to basically a negative effect, a nonrecurring negative effect that we recorded last year and which has to do with a quite significant impairment of assets in our fishing division that operates in the south of Chile. The main drops come basically, once again, from our forestry division at Arauco and have to do basically with operational issues, plus some nonoperational effects that are also nonrecurring that we will explain further on.
On Page 7, we are giving out some more detail about the net income statement. You will see here that we have recorded a figure of $148 million, which is higher than last year. And this increase comes basically from nonoperating factors. There is a higher other income, which is mainly recorded at our fuels division, Copec. The consolidated numbers of Copec includes some sales of noncore real estate assets, also include badwill, which is -- it's a profit from a badwill effect recognized in the acquisition of ExxonMobil's assets. So having done the purchase price allocation for that process, we ended up with a badwill recognized as net profit for the quarter. And we also have effects at Arauco, where last year we had quite a significant adjustment, a negative adjustment on the evaluation of biological assets as we will explain further on. We also had an adjustment this year, but it was much smaller than the one we recorded in the fourth quarter of 2017.
Together, with that, if you look at the other expenses line, you will see a less negative figure as well and that has to do with the impairment charge on operational assets that we recorded in our fishing division in the fourth quarter of 2017.
Finally, lower financial expenses in Arauco. Once again, because of the nonrecurring effect that we had in the fourth quarter last year, related this time to refinancing operation that evolved the buyback of certain outstanding bonds in the market and that brought about some accounting charges -- some onetime accounting charges.
In relation to operating income, we have a slight increase there, and that basically stems from a stronger result in our fuels division. And once again, that is explained by increase in margins both in Chile and in Mapco in the United States.
Finally, regarding tax. We had a strong positive tax effect last year, which was brought about by a tax reform in Argentina and in the U.S., which yielded a positive result related to deferred taxes, which we don't have of course this quarter. It is partially offset by 1 positive effect that we do have in Colombia because of the same concept. So once again, deferred taxes related to a tax reform. But this time, the effect is much smaller than what we had last year.
Moving on to Page 8. We are showing some ratios here. We are seeing a drop in operating margin, but as we will see further on, this has to do basically with one -- with some onetime nonrecurring expenses -- amortization expenses that we have particularly at Terpel. Also, of course, affected by the drop in sales in Arauco. The return on capital employed is quite stable with respect to last quarter, amounting up to 11.6%.
Regarding the net financial debt over EBITDA, once again, we're stable, standing at 2x. 2x is quite a comfortable figure for the company to have. And regarding our debt maturities, as you can see there, it's a well-balanced debt schedule for the coming years. We have made some progress as well in refinancing some of the amortizations we have due for this year, as we will see further on.
Moving on to the forestry division. We can see the net income here, which is down with respect to the fourth quarter of 2017, and where the main effect comes from taxes once again. As I already explained, it has to do with the effect of the tax reforms in Argentina and the United States that was recorded in the fourth quarter of 2017. Together with that, we had some nonoperating income effects. There is a negative effect in the fourth quarter of 2017 related to adjustment on evaluation of biological assets, which was quite strong. There is an effect as well this quarter, but it's much less important than what we had last year. So the positive variation there has to do essentially with the very high adjustment that we had last year. Financial expenses, once again, we had a nonrecurrent effect last year because of the refinancing operation that took place during the fourth quarter of 2017.
In relation to operating income, we have seen a positive pulp scenario during most of the year, 2018, of course, and we will come to that in a while, but pulp prices fell quite strongly during the fourth quarter. But even in that scenario, we recorded a better operating income than what we had last year in the fourth quarter 2017.
Together then -- with those good pulp prices, still good with respect to fourth quarter 2017. We have an improved performance of the wood product segment. We have higher sales volumes in panels, which are partly explained by the consolidation of the Masisa Brasil assets that we acquired towards the end of 2017.
Some comments on pulp, on page 12. Year-on-year, we have an increasing EBITDA explained by higher prices. Quarter-on-quarter, we have a drop in EBITDA explained by lower prices and, especially, by lower volumes. As you can see in the table, in the right bottom corner, we saw prices declining by 4% quarter-on-quarter, but volumes declining by almost 12% quarter-on-quarter. And as a result of that, EBITDA amounted to $286 million compared with $395 million in the previous quarter. However, we're still above what we recorded in the fourth quarter of 2017, to essentially drop in volumes with respect to last quarter.
Regarding costs. We have seen some increments in unbleached, bleached and short-fiber as well, and this has to do with basically 2 effects, which explain a large part of this increase, which are fixed costs because of the lower production and also transfer pricing between our forestry division and our pulp division. This last effect is an internal effect, which doesn't affect consolidated EBITDA. It's just a transfer between 2 of our divisions. As always, we're showing up some information there related to the maintenance stoppages that we had gone through and that we expect to happen during the first and second quarter of this year as well.
Some additional comments about pulp on Page 13. As you probably know, we saw a significant drop in demand in the last few months of 2018. This to a great extent appears to be linked with the uncertainty brought about by trade wars going on between China and the U.S. As a matter of fact, you see China ending up the year with a growth of 1.5%, when it happens to be the case that up to September it had grown more than 4%. So that gives you an idea of the contraction in demand coming from China in the final months of 2018.
This, of course, resulted in an increase in inventories. And as you can see in the graph shown there, inventories amounted to 41 days in the case of hardwood and 57 days in the case of softwood, both figures which are quite above the normalized average figures for the long-term.
Some more information on Page 14. What we are showing down there are the net realized pulp prices in China for Arauco. You can see that we went down from a very stable level of close to $900 in the case of softwood and close to $800 in the case of hardwood, we went down in a quite abrupt way to $650 in the case of hardwood and $680 in the case of softwood, so almost a $200 per ton decrease for softwood and $154 for hardwood approximately.
Those level have remained stable for most of the summer. And as a matter of fact, we are in March, showing some signs of improvements and some increases in prices have been able to pass through. And therefore, our net realized prices for March went up for -- to $680 in the case of hardwood and $710 in the case of softwood.
So with that outlook right now seems to be more positive than what we saw by the end of last year. We expect demand to recoup after the Chinese New Year and, therefore, inventories to gradually be normalized, although there is still a question mark on the speed at which they can be normalized.
The gap between the least prices or the indexes for softwood and hardwood continues to be above $100, $133. But as you see in the graph to left, the gap between the realized net prices is much less than that. It's around $30. There is a more significant effect on softwood than hardwood in terms of reduction in price, and that has to do at least in part with the fact that demand for softwood has decreased more than hardwood. And in turn, that is brought about by demand for packaging, which is very intensive in the use of softwood, and packaging demand is very uncertain in this -- or has been very uncertain in this scenario of trade wars -- very affected by this scenario of trade wars.
Moving on to wood products on Page 15. We can see that there is an increase in EBITDA with respect to the fourth quarter last year, although this has dropped with respect to the third quarter this year. Volumes in general have been going down a bit. So there is a decrease in volumes, in general, in this kind of products.
You can see there that production is quite stable, but volumes in general have gone down with respect to the third quarter. Although, in many cases, they have increased with respect to the fourth quarter last year.
There is also some price effect -- some pricing effects, especially, panels with respect to last year where we can see a drop of almost 6%.
Briefly, some elements about the outlook for these kinds of products here on Page 16. North America is our most important market with 46% of our total sales in this division. This, as we have commented before, is driven to a great extent by housing starts. Housing starts are -- have ended January at a rate of 1.2 million units, which is quite stable and has been quite stable for a while.
In the case of particle boards, we see a positive outlook, no significant pressure on demand. We see, however, some potential oversupply in MDF. In remanufactured products, sold also in North America, we see in general during this month of the year, we see some seasonality, so we see slow demand, but that should definitely pick up from second quarter 2019. In the case of plywood, demand is okay, but there is a strong competition coming from Chile, but also from Brazil and from some other local producers.
In our other most important geographical areas, South and Central America represents almost 40% of our sales. Within this area, Brazil is the most important market, and we are seeing positive trends in Brazil. We are seeing, in general, an upward demand and a positive forecast with some potential price increases.
Argentina, there is an uncertain economic situation there that has impacted margins. There is a depreciation of the local currency that has also impacted our margins in dollars, and that uncertainty still remains. However, for some particular products such as melamine products, demand is stable and margins -- we see margins has been quite stable as well.
Chile is doing okay. Demand is healthy. And in the case of MDF, we are seeing potential for an increasing demand, actually.
And finally, our smaller markets such as Asia and Europe. In the case of Asia, the effects of the trade war also in this division are very clear. And as long as the uncertainty is there, we expect the trend to continue just the same. So not only Chinese, but also Taiwanese and Korean demand is affected by this uncertainty brought about by the trade wars. In case of Europe, however, we are seeing stability, nonsignificant changes in prices and a potential for increases in -- as from the second quarter.
Regarding our fuels division, we are now moving to Page 19. We are seeing Copec recording a significant increase in its EBITDA with respect to last year -- to the fourth quarter last year. This is shown in million Chilean pesos. This EBITDA is brought about basically by higher margins both in Chile and the U.S. In case of Chile, we had good results in both channels. We have seen both volume and margin increases in the gas station channel and also in the industrial channel. Together with that, we are seeing better input margins in this particular quarter. So this is a volatile component of the margin that in this particular quarter was quite strong. All of this is offset by a FIFO effect, which was slightly positive. And when comparing it to last year, it is definitely less positive than last year. So the good commercial performance is offset to some extent by this FIFO effect, which was almost nonexistent this year compared to a strong positive effect last year.
And that had been both at Copec and at Terpel. Mapco also showed a very good performance, and we will talk a little bit about that going forward. In terms of nonoperating income, we had quite a few nonrecurring effects. We have recorded a higher other income. And as I told you before, that is related to sale of noncore real assets -- real estate assets in Copec and Chile. And also to the recording of a badwill, so this is the difference between the fair value and the value paid for the positive difference between the fair value and the value paid by Terpel for the acquisition of the ExxonMobil's assets. So this was brought about by ending the purchasing price allocation process we recorded at badwill.
Besides that, we have a positive effect in other expenses, what we did here was basically reclassify the whole of costs related to acquisition of ExxonMobil assets. So we capitalized those costs rather than recording them as an expense for the year. And all of this effect took place in the fourth quarter, so that involves -- most of that increase or positive effect has to do with this capitalization of costs related to the Terpel, once again, the Terpel's acquisition of ExxonMobil's assets.
All of that is offset by higher financial expenses in Terpel because of the higher level of debt that it had on average during the year, once again related to the acquisition of ExxonMobil.
Finally, and very briefly, we had higher taxes related to in part, of course, due to positive results -- the positive operating results, but also in part by a positive effect that was spread about by a tax reform in Colombia. And so once again this deferred tax effect that is recorded in the net income, and that is brought about by the drop in the tax rate that is coming -- that is going to come forward in the following few years in Colombia.
Some operational figures on Page 20. We have ended up market share with 56.3% market share. You can see new evolution there. We have actually increased our market share towards the end of the year. That is cut shown clearly in the graph, but it's commented there. We have increased up to 58% in December 2018, and this has to do with new industrial contracts that are now starting, and that basically are related to the mining clients in Chile, and that will mean quite a significant increase in volumes for the months to come.
As we commented before, in relation to the volumes in Chile, we had a good performance and we had volumes growing in both channels, 2% in the case of gas stations and 3% in the case of the industrial channel. As I told you before, this 3% is affected to a great extent by the contracts that are now starting, and we'll continue to boost industrial volumes for the months to come.
This is a business with margins that are quite stable in real peso terms. We have some elements of volatility as we have commented before, and this basically is related to the FIFO effects, which are the effects on inventories of variations in oil prices, and also the opportunities we have for importing directly, which sometimes allow us to record additional margins.
In relation to Mapco. Mapco ended up the year with a 7% increase in volumes, which is quite outstanding in an area where volumes for the market were flattish, growing not more than 1% for the market, 7% for Mapco. Together with that, the last quarter recorded an exceptionally high unitary margins measured in cents per gallon, and that allowed Mapco to reach a final EBITDA for the year of $47 million. Developments of Mapco are on the right track. We have increased volumes. We are gradually making progress in our program for improving the image of gas stations, and our -- and we have improved margins for convenient stores and grown sales at convenience stores as well.
Our challenges going forward have to do with trying to stabilize margins a little bit more. They are quite volatile. Also had to do with operation efficiency in terms of bringing down costs and SG&A. Together with that, we are working in improving or optimizing the product mix at convenience stores. But so far the performance has been quite good, and especially in this last quarter.
On Page 21, some more detail on Terpel. You can see there, these are figures that are shown in million Colombian pesos, which is the functional currency for Terpel. You can see that EBITDA is -- slightly increases with respect to the fourth quarter of 2017, quite flattish, but however operating income is down significantly with respect to the fourth quarter of 2017. That has to do with a onetime effect related to this Terpel acquisition costs of ExxonMobil that were capitalized and then amortized during the year.
So it's a one-off expense that brings operating income down, but EBITDA is quite stable. In general, we had positive effects in terms of volumes rising, in terms of margins going up and, of course, the contribution of the new ExxonMobil business. All of that was offset in this particular quarter by lower -- or a negative effect actually coming from inventory. So the FIFO effect, which is called the decalaje in Colombia, was negative in this particular quarter and that offsets all of the positive effects coming from growth in volumes, from growth in margins and from the contribution of the new assets of ExxonMobil.
There is a breakdown of the volumes down there. You can see that, of course, Ecuador and Peru are significantly influenced by the new assets acquired. However, in the case of Colombia and Panama, there are no new assets there and the figures are very attractive, very good figures for the quarter, 7% up in Colombia and 13% up in Panama.
We also have an indication there of the contribution coming from ExxonMobil assets, the new assets that were acquired during this year. Just to remind you, the assets related to Peru and Ecuador were -- the contribution of those assets was recorded from March this year -- 1st of April actually. The contribution of the assets of Colombia was recorded as from the middle of this year basically, around June this year.
So these figures are not representative of a whole year and, of course, it was also affected by a lot of setup expenses, a lot of logistics expenses related to the optimization of the operation of the assets, setup costs, and particularly in the fourth quarter, some inventory re-estimations or reevaluations that took place and that have affected negatively the figure for the last quarter. And so we continue to give out as a guidance the figure -- EBITDA figure for the whole year, the incremental figure for the assets related to ExxonMobil acquired and are going to be remained within Terpel. There should be around $70 million of incremental EBITDA coming from the ExxonMobil assets.
So this year, we still do not have representative figures.
As for Abastible, that was shown on Page 22. There is a net income effect, which is quite significant, which is the fact that there is a negative effect last year coming from impairment at one of the subsidiary companies called Sonamar, which is not present this year. Together with that, we have an improvement in the operational figures. We have better performance basically in all countries. Lower volumes in Chile, but offset however by better margins in Chile. And growth in volumes in Peru and Ecuador, being very stable at Colombia.
Tax rises with respect to last year and that has to do basically with the better performance during the year, plus some effects related to the recognition of foreign assets in Abastible.
Some operational figures. You can see here that volumes dropped slightly in Chile in the fourth quarter. As I said, that was offset by increases in margins, flat volumes in Colombia basically, volumes increasing very interestingly in Peru. Though the mix is not yet the optimal mix, we're trying to improve our performance at the bottle channel. This is basically the wholesale channel, which has a lower margin, the one that grows the most. We've been growing slightly in the bottle channels for some months in a row. This has responded to some commercial strategies that we have implemented. So we are on the right track in Peru, but still expecting a better performance in Peru. And we continue to believe it's a very good long-term acquisition, but so far EBITDA has been below what we expected. Good trend, though.
And in Ecuador, the good trend is maintained. We had already seen volumes growing for a while, and this continues to happen. So 6% increase in volumes, and that allows for -- markets going up, and it has been going up for a while quite significantly.
Regarding outlook in Chile, some comments. We see positive perspectives for the bottled market. There are some strong demand coming from housing development. There's an interesting effect coming from immigration as well in Chile.
In the bulk segment, we've done very well in terms of replacing other alternative fuels. Probably the most important of which is firewood, which is very important in the south of Chile. So replacement of firewood is beginning to be seen as a very strong driver for demand in LPG. It should continue to happen going forward because of the costs -- environmental cost basically associated with the use of firewood.
In Colombia, volumes have been stable, and we continue to see them that way. There is a strong competition coming from natural gas. And over the last 2 months, we've also seen some competition of illegal volumes coming from Venezuela. However, we are working very well in the bulk segment, and we also expect to see some alternative fuels replacements.
Peru and Ecuador, we've already commented on those.
Sonacol, on Page 24, this is a very stable unit, which is basically the company that operates the pipelines. A small drop in EBITDA and operating income related to the small drop in fuels transported.
On Page 26, we have some brief comments about other related companies. In the case of Igemar, which is our fishing division, there's a loss for the quarter, but it's a loss that is much less negative than in the fourth quarter 2017. This is explained by the very strong impairment that was carried on, on the assets for our fishing division in the south of Chile in the fourth quarter of 2017 which amounted to close to $80 million pretax and pre-minority interest.
In the case of Alxar Internacional, this is the subsidy company for which we are holding the investment in Mina Justa, we are starting to record results in this new subsidiary, and we have -- of course, in this development stage, we have a loss for the quarter, which is made up of SG&A basically and financial expenses related to the development costs for the project.
Corpesca, which is the division that operates in the north of Chile. There's a loss as well, but basically stemming from nonoperational factors. The operational performance at Corpesca this year was much better and actually quite positive and much better than last year.
Laguna Blanca is the subsidiary -- the related company, it's an associated company for which we hold our 50% stake in the coal venture that we operate in the South of Chile, Mina Invierno. We recorded losses for the quarter related to a small impairment of assets. Operational performance, though, has been good this year.
In the case of Metrogas, which is natural gas distribution, we are seeing an increase in net income, which is basically operational and which has to do with higher margins related to higher prices and also to some reclassification of administration expenses.
And finally AGESA, which is the company that sources or that supplies the gas to Metrogas is usually quite stable and it has stayed in those lines.
Those are the numbers for the quarter.
In relation to the most important developments, on Page 28, a brief comment about the MAPA project, which is underway. This is the most important investment project in the history of the company, the highest CapEx in the history of the company, $2.3 billion approx. We have gone through several stages already in October 2018. Arauco has signed equipment contracts with Andritz and Valmet. In February 2019, we started the earth-moving works. The estimate for beginning of operation continues to be the first half of 2021, and that is the time when the old line will also shut down.
We finally -- we were finally able to close the acquisition of Masisa Mexico. This was subject to some conditions imposed by the regulatory authorities in Mexico. We ended up buying 2 of the 3 plants that were originally scheduled for purchase. We bought 2 complexes located in Durango and Zitacuaro. And the investment related to that acquisition was finally $160 million, having gone down from $245 million that we originally announced. So the amount went down because of this mill that was left out of the acquisition. The total installed capacity is 250,000 cubic meters of MDF and 300,000 for particleboards.
Regarding Grayling. The project is finished. The first tests of production have been already carried out. We ended up investing $450 million for a capacity of 800,000 cubic meters per year. So ready to be up and running.
In the case of Valdivia, also a significant progress made already, 65% completion. The CapEx involved continues to be in line with our original estimates. $190 million is the updated figure. This will involve the total of 2 years of construction, and therefore, we are expecting the project to ramp up during late 2019. This is a project that will allow us to enter a new market which is the dissolving pulp market which supplies, among others, the textile market. So a new market with margins that have historically been larger than for paper-grade pulp. So a very interesting option there for Arauco and which still maintains the flexibility to come back to paper-grade pulp if needed.
A brief word on the forestry wildfires that took place during this year. This is a -- these developments are very, very important to be monitoring and quantifying. Arauco has invested heavily in systems for controlling and preventing these wildfires, and the results are definitely there. 1.5 thousand hectares affected by forest wildfires this year, which is up with respect to last year, which was milder in terms of wildfires affecting the whole of the country, but definitely down with respect to the most serious and negative seasons that we've had. So all the efforts carried out by Arauco to control this risk are yielding very good results.
We already commented on what's shown on Page 31. This was a long process for acquiring the ExxonMobil assets which has finally come to an end. This is a process that started in 2017, actually. This was signed, but then was subject to different requirements by the Colombian authorities. We gradually incorporated the assets of ExxonMobil into our portfolio. We had to sell the fuels assets in Colombia, and we had to do it through a separated entity which was not controlled by Terpel. It was an autonomous trust, a blind trust that managed the assets and sold them during most of the year. And this final stage was finally carried out on November 30, 2018, when the asset was sold for $232 million to the Peruvian company Primax, which is also a relevant South American player in the fuels market. So with all of that, we had ended the process. And Terpel, as we mentioned before, has been able to consolidate the operations in Peru and Ecuador since April and the operations -- and the lubricants operations in Colombia since July.
On Page 32, a brief word on refinancing. We had quite significant maturities for the year 2019. We already commented on part of the refinancing we did last year. But at the beginning of this year, we went ahead with another part of refinancing which had to do with a syndicated loan outstanding at Copec. It is a $500 million loan that was refinanced once again with a club deal of 5 banks. It has a 5-year tenor and very attractive conditions, actually better for ourselves than the previous facility.
An announcement that we made during the last quarter of last year as well and also during the summer month of this year, the southern hemisphere summer month of this year, is Copec's announcement of a network of chargers, electrical chargers in its gas stations. This has to do, of course, with the potential scenarios that Copec might eventually face if the mobility issues or the other types of mobilities, non-fuels, continue to grow. Of course, we are looking at that. We are preparing for the different scenarios. We already inaugurated and launched this network that is actually the largest network in South America that comprises enough points of sale to cover more than 700 kilometers in Chile. And in order to do this, we are keeping our options open in terms of being able to handle and reach out to all of the opportunities that might be brought about through the changes in mobility because of the new technologies. So electrical scenarios where electricity is dominant, scenarios where hydrogen is dominant, we're trying to keep our options open for tackling all of those, and we are doing that by trying to lead the process rather than follow the process. So first step here has been the inauguration of this network of gas stations with electrical chargers.
And finally a word on progress at Mina Justa. This is our venture in Peru where we hold a 40% stake. The company is controlled by our Peruvian partners called Minsur belonging to the Beca Group. This is a project that has a 17% progress as of January. This is totally in line with schedule. We continue to expect a total CapEx for the project of $1.6 million. This is the figure that we had revealed before. This is going to be financed with $900 million of debt, which is already in place, and the remaining $700 million via equity contributions from the partners. So Copec should be contributing gradually up to 40% of those $700 million along these couple of years. We expect the project to be starting operations by the end of 2020.
Just to remind you, this is located in the South of Peru, a very good location -- place close to the sea with no significant development risks. And it is expected to reach an average production of 150,000 tons per year for the first few years, and an average for the total life of the mine of [ 115,000 tons ] of copper.
Those were the numbers, the analysis and the news that we have prepared for you for today. I will be happy to open up the floor for questions if you have them. Thanks.
[Operator Instructions] And our first question today comes from George Staphos with Bank of America Merrill Lynch.
A couple perhaps to start, and then I'll turn it over. First of all, given the relatively narrow spread between softwood and hardwood pricing in China, to what degree, from where you sit, can your customers increasingly use softwood? What are you seeing incrementally in terms of their use of softwood versus hardwood in terms of how they're flexing their recipes relative to this relatively narrow price gap? And then relatedly just a general question about the pulp market. What are you seeing near term? Obviously, we heard not too long ago from the Arauco call, but what are you seeing overall in terms of market development trends that give you confidence in your commercial strategy?
Okay, I guess, the answer is going to be very similar to what you hear. We actually have the Arauco team here, which are quite more directly involved in those markets than we are. So I'll hand it over to Gianfranco for the answer.
Okay. Thanks, Rodrigo. George, well, regarding the spread, I think that is the first thing, very short-term phenomenon of narrowing the spread. So I don't think the customers will be adjusting the formula of production for this short-term effect. So probably, they will wait until the market stabilizes a little bit and they can see more medium-term spreads between long fiber and short fiber. It's not so easy to change the formula of producing your products in like a couple of months. So I won't expect any major changes in demand happening very soon. And regarding the prospect for the market, I'm going to repeat myself again. But we have seen an increase in prices in March, and I think that, that momentum will keep on for the coming months because if you look at the structure of the market, it's still dominated by lower supply coming in the next 2 and probably 3 years. And demand has been disturbed a little bit shortly because of the trade war between the U.S. and China. So as long as that disturbance goes out of the picture, probably, they're going to be looking more in the medium term and looking at the dynamics between demand and supply, and that will probably tend to make more easy prices going up again. So in that way, I'm optimistic that the trend will go back to upside. But we have to see it month-by-month because we still have these big inventories buildup, especially in short fiber in the -- especially in China. So depending on the rate of decrease in that inventory, it will receive a short-term momentum in pricing. But long term, medium term, the structure is still the same. The only big project coming to the market is our project of MAPA in 2021, and demand should be structurally going up in the same levels that we have seen in the past.
Okay. Two quick questions on the fuels business. One, can you provide a rough estimate for what the FIFO comparison -- negative comparison was this quarter, either versus third quarter or versus last year? And then just from an accounting standpoint, can you go into what allowed for the capitalization of the expenses that it sounded like were previously being expensed on an ongoing basis?
Sorry, the last question was? Sorry.
Well, there was a capitalization of expenses, I believe, in Copec, if I'm not mistaken, that previously, if I heard you correctly, you were expensing. And that was one of the reasons there was a comparison benefit 4Q-versus-4Q. A, am I correct in that premise, and b, if so, what caused that ability to capitalize versus the prior treatment?
Yes, sure. Regarding your last question, this is a deal that wasn't closed until the very end of the year since we went through different stages. And therefore, we have permanently revised the accounting treatment for the different expenses related to this acquisition. When we finally came up with the PPA, the purchase price allocation, process for the assets, we talked to the auditors and it made -- finally made sense to record this as capitalized costs that were amortized during some period rather than direct costs. So it's just an accounting treatment that was consulted with the auditors and accepted by the auditors, and that brought about this onetime adjustment in amortization and in other expenses that have referred to. Regarding the FIFO effect, we do not have an exact number that we can reveal, but a rough number is approximately $20 million in total that -- of a positive effect that we had in the fourth quarter last year and then we didn't have this year. So approximately very roughly, bulk number, $20 million.
And our next question comes from Carlos De Alba with Morgan Stanley.
So just wanted to -- on the Mobil -- ExxonMobil assets that were bought, I think the outlook is $70 million incremental EBITDA in 2019. How do you see this evolving in the following years? How much is the potential that you still see beyond 2019 in the EBITDA generation of these assets in other words? And then going to Minas -- Mina Justa, could you remind us if this would be an efficacy production or you will sell concentrate into the market? And if I may ask also, if it is concentrate, how is -- or how much arsenic do you have in that concentrate?
Well, related -- in relation to your last question, Mina Justa is both. We are doing both. It's a mixed operation. The arsenic content, I can look it up for you. I don't have it at this time. And regarding ExxonMobil, the -- it's going to be gradual, probably. We had a 17 EBIT -- $70 million EBITDA for last year, which, as I said before, is highly -- is not at all representative of the long-term figure that we are expecting, and that has to do with 2 things. One is that we only partially recorded the contribution of these assets in time. We started Peru and Ecuador in April. We started Colombia in July. So the whole year is not recorded. And besides that, we had a lot of setting up -- setup costs and logistical costs related to the startup of the operations. This was further complicated by the fact that we were imposed this restriction of selling one of our lubricants plant in Colombia. This was imposed by the regulatory authority as well. And in order to do that, we had to totally reshuffle our logistics in Colombia. And that, of course, brings about incremental costs that were not budgeted at the beginning. Having said that, we expect the contribution this year to gradually approach the $70 million. We're probably not going to get to $70 million this year, but probably quite close.
All right, okay. And then if I may come back to the Mina Justa project. Of the 115,000 tons per year average production, how much is exactly -- or how much is copper in concentrate?
We'll send you the exact detail, and we can send you actually more detail than that. We -- I don't have it right here.
[Operator Instructions] Our next question comes Thiago Lofiego with Bradesco BBI.
I have a couple of questions here. The first one is also on Arauco, but now, looking at the span of the vision. You mentioned that you have concluded the acquisition of much of the assets in Mexico, but again, was a bit lower -- a lower acquisition than you expected with just 2 plants instead of 3. I just want to know how does that impact your strategy in the country. And with the conclusion of this acquisition and the conclusion of the Grayling expansion in the U.S., if you can comment on any potential new steps for growth in this division? Also, if I may, with panels, we heard in Arauco's call that you might consider a new round of price hikes in Brazil. I just want to know if you could comment also on the magnitude of this potential hike. And finally, if I may, another question on Mina Justa, continuing on Carlos' question, just want to know if you can comment on the CapEx for this project in 2019. And what are the next steps in terms of conclusions on -- the milestones of this project that you can have in the short term? These are my questions.
Okay, I'll hand it over to Gianfranco for the comments on the wood panel division.
Okay. Well, regarding Masisa Mexico, we acquired 2 of the 3 mills, but we are not changing our strategy. I mean, the capacity and the size of our operation there is going to be smaller than we thought initially, but our strategy will be the same to complement the products that we have imported from Latin America and try to [ make sound ] efficiencies in administration, in commercialization and serving our clients. I mean, that certainly has not changed, and we'll try to get value from the assets that we have. It's a smaller operation, but we don't think it's not as good as we thought. I mean, it's a very good acquisition, and we're very happy also with the price that we got. And regarding the new projects, it's true that we finalized the project in Grayling. We acquired the assets in Masisa. We don't have any big projects announced. We have an increase in capacity in our Teno mill in Chile for 40,000 cubic meters, and we're looking for new opportunities in greenfield, and of course, some M&A acquisitions. But we don't have anything big to announce at this point. And regarding panel prices in Brazil, I mean -- I told that the market is looking better. I'm not saying that any size of price increase. I mean, we're always trying to get better margins, and we will try to do it, but we don't have a number to announce in terms of prices increase for panels in these facilities at this point. It's something that is negotiated with -- differently for every client every month, and I don't have visibility on the size of the potential increases in prices that we'll try to get in Brazil.
And regarding Mina Justa, which was your other question, there's -- just a pending answer to a previous question, which was the one brought about by Carlos in the previous question, there's approximately 2/3 of concentrates and 1/3 of cathodes. So we'll come up with the exact figure, but it's approximately 2/3 concentrate. Regarding the profile for the contributions -- for the CapEx contributions that you asked about, we already went ahead with a 250 -- approximately 250 -- this is from the point of view of Copec, the contribution for the equity of the project, it was $250 million approximately in 2018. That included basically $180 million in the acquisition or the interest into the project plus $70 million of development -- of the initial development. That is going to be followed by approximately $150 million in 2019. Once again, this is the equity portion contributed by Copec. Just to remember you this -- just to remind you this is complemented by the equity contribution brought about by Minsur and by the debt financing of the project as well. But from the point of view of Copec, this is non-consolidated because it's an associate company. So $150 million of equity contribution during this year, approximately, during 2019. And then we're going to end with approximately $100 million of equity contribution in 2020. And that is -- that investment profile is related to the usual milestone in a mining project, and we can give you more detail about that in a while.
And our next question is a follow-up question from George Staphos with Bank of America Merrill Lynch.
In North America and the U.S. specifically, we've had a little bit of a slower start to the building season. Now it is obviously very early. You really don't get into the building season until later in March and into April. To the extent that, that's had much effect, if any, on Grayling, recognizing that everything that Grayling's going to be producing is going into single family, a lot of it's going to be repair, remodels, et cetera, what effect has the slower start in the U.S. had on the expected ramp-up in Grayling in terms of demand, recognizing it delayed you in construction as you mentioned in your slide?
Thank you. Gianfranco's going to speak.
Yes, it's true. I mean, the start of the year has been slower. We have told it in the results from our North American operations, specifically in the U.S. And they're basically because of weather conditions, the slow start in construction, as you said. But I mean, the mill is starting really with commercial production in March. It's going to produce probably 40% of total capacity this year, so I don't think it's going to be affecting a lot the start of the year. Probably once we get to clients, it's going to be more or less in April, May and then hopefully at that time the market is going to be better. And this kind of products goes more to remodeling rather than construction. And it depends also on the geographic area. So it's different in the Northeast than in the West or in the Southeast. So it's more a local market. And we are -- we have logistic advantages there, so we probably will get better cost to the clients in that zone in the Northeast of the United States.
My last question, and I will finish, Rodrigo, to the extent that we look at the market share exiting for fuels at 58% versus what had been the 56% average for the quarter, is that 58% now the appropriate run rate as you're carrying into the first quarter? Or is that actually still understating what your market share for new contracts would be? Would you be much higher than the 58%?
Thanks a lot. This is -- yes, definitely, there's an upward trend with respect to what we were recording before. 58% seems to be a reasonable figure to have in mind for the year, and this increase was brought about, as you correctly say, by the effect of the mining contracts that are gradually kicking in. This figure can always be altered by an element that lends some volatility to our market share, but which has progressively become less important, which is the fuels demanded by power-generation companies. Maybe has to do with the presence of alternative sources of generation in the country. It's definitely declining. But whenever it happens, there are very large volumes which are devoted to power-generation companies, and that may change a little bit the figures for market share. But 58% seems to be a reasonable figure to have in mind.
And this will conclude our question-and-answer section. I'd like to turn the conference back over to Mr. Rodrigo Huidobro for any closing remarks.
Okay. Thanks a lot for joining us this time, and we expect to meet you again probably around mid-May in order to have a look at the results for the first quarter 2019. Thanks very much.
And this concludes today's presentation. You may disconnect your lines at this time, and have a nice day.