Fitch Ratings Affirms 'A-' Ratings of CMPC.

Business Editors

CHICAGO--(BUSINESS WIRE)--May 6, 2004

Fitch Ratings has affirmed the 'A-' local and foreign currency credit ratings of Empresas CMPC S.A. (CMPC). In conjunction with this rating action, Fitch has affirmed the 'A-' ratings of Inversiones CMPC S.A.'s (Inversiones) US$250 million notes due in 2005 and its US$300 million notes due in 2013. These notes are unconditionally guaranteed by Empresas CMPC S.A. (CMPC). The Rating Outlook for these ratings remains Stable.

The 'A-' credit ratings reflect the company's diverse cash flows, low-cost production capabilities due to its access to inexpensive fiber, market-leading positions in a number of products and conservative financial profile. The ratings are also supported by CMPC's ownership of 709,000 hectares of land in Chile and Argentina as of December 31, 2003. The ratings further reflect the company's conservative financial management.

CMPC's most important business is its market pulp division. During 2003, it accounted for 30% of the company's sales and 50% of the company's EBITDA. CMPC's pulp investments consist of three mills with a combined capacity of 1.2 million tons per year. The company's competitive position in market pulp is almost solely derived from its access to inexpensive fiber, which is primarily sourced from company-owned plantations. Unlike softwood species in the Northern Hemisphere, which require from 50-80 years of growth before they can be harvested for sawlog purposes, the radiata pine trees grown on CMPC's Chilean plantations reach maturity for pulp wood purposes 16 years after planting and can be used for sawlogs 25 years after planting. The eucalyptus trees grown on the company's plantations are used for hardwood pulp. They can be harvested between 10 and 14 years after being planted. CMPC's cost advantage vis-a-vis its competitors in the Northern Hemisphere is expected to be sustainable as a result of the excellent growth rate of its softwood and hardwood trees.

CMPC's newsprint, boxboard, printing and writing paper division accounted for 23% of its sales and 19% of its EBITDA in 2003. The company is the market leader in all of these products in Chile. This division has grown rapidly during the past decade due to major investments in boxboard, newsprint and corrugated paper equipment. Exports of the first two products provide CMPC with additional geographic diversification.

In Chile, Uruguay and Argentina, CMPC is the leading producer of tissue. Historically, this division has either been the largest or second-largest source of EBITDA for the company. In recent years, this division has been negatively affected by the economic turbulence in Argentina and the relatively stagnant Chilean economy. During 2003, the tissue division was the third most important contributor of cash operating profits, accounting for 15% of EBITDA. CMPC's dominance in tissue is expected to continue due to its low production cost structure (the result of modern facilities and access to recycled fiber), extensive distribution network and the strong brand equity of its products. Importantly, competition in this business is essentially limited to regional companies due to the high per-unit cost of transportation, which makes it nearly impossible for outside companies to export tissue into the region profitably.

In 2003 CMPC's revenues increased to US$1.441 billion, an increase from US$1.287 billion during 2002. About 53% of the company's revenues were generated out of its key domestic markets -- Chile, Argentina, Peru and Uruguay. CMCP's EBITDA rose to US$398 million from US$331 million during the prior year. The increase was driven by higher prices for most of the company's products, as well as increased sales volumes. Currency changes did not affect EBITDA in a material manner, as the average exchange rate between the Chilean peso and the U.S. dollar was 690 pesos per dollar in 2003. This compared with an average exchange rate of 689 pesos per dollar in 2002. CMPC ended 2003 with US$862 million of debt and US$375 million of cash and marketable securities. In terms of credit-protection measures, CMPC's net debt-to-EBITDA ratio improved to 1.1 times (x) from 1.5x and its interest coverage ratio, as measured by EBITDA-to-interest expense, increased to 8.9x from 7.2x in 2002. These ratios are consistent with the company's credit rating, given the current stage in the pricing cycle for pulp and paper products.

CMPC's EBITDA should increase in 2004 from 2003 levels due to a very strong U.S. economy, as well as an improving economic environment in Chile and Argentina, the company's two main markets. The company's EBITDA will also be higher in terms of U.S. dollars due to the strength of the Chilean peso versus the U.S. dollar that has resulted from very high copper prices. During 2004, CMPC is expected to spend about US$300 million on capital expenditures. The company's dividends are projected to be about US$75 million, its taxes should be between US$25 million and US$50 million, and its net financial expenses should total less than US$50 million. If CMPC's EBITDA ranges between US$450 million and US$500 million, the company's net debt should decline by about US$50 million.

In 2004, CMPC will begin constructing a new pulp mill with an annual capacity of 780,000 tons of market pulp. The mill will cost approximately US$700 million and take about 24 months to construct. With cash and marketable securities of US$375 million at the end of 2003, expected free cash flow of US$50 million in 2004 and cash from operations between 2005 and 2007, CMPC should be able to finance the project without altering its credit profile.