(Reuters) -Chilean industrial conglomerate Empresas Copec on Thursday posted an 21% drop in second-quarter profit although revenue surpassed expectations, as the forestry giant faces falling pulp prices and impacts from the U.S.-China trade war.
Net profit for the three months ended June hit $228 million – in line with forecasts of analysts polled by LSEG – from revenue that edged down 1% to $7.18 billion.
However, revenue for Copec, which owns a large forestry business as well as fuel distribution, mining and fishing operations, landed ahead of analysts’ $6.84 billion estimate.
Copec attributed the decline in sales largely to lower prices for pulp – a raw material used in a range of products such as paper, packaging and some textiles – though it partially offset this by selling off larger volumes.
Copec said China faced an oversupply of pulp even though domestic consumption and demand remained strong, while in Europe, an oversupply had combined with a lower use of “almost all grades of paper”, causing some paper mills to shut down.
“The dissolving pulp market has been affected by the trade war between the United States, China, and other Asian textile-producing countries,” it added.
Copec said its forestry subsidiary Arauco sold nearly 8% more pulp compared to the same quarter last year, but prices were down more than 12%.
Arauco contributes the bulk of earnings for Copec, which last year counted over 9,360 square km (3,614 square miles) of land planted mainly with eucalyptus and pine forests across Brazil and South America’s Southern Cone – an area larger than the U.S. territory of Puerto Rico.
Washington has slapped a 50% tariff on goods from Brazil, but excluded some major exports, including various types of wood pulp, sawn wood and paper products.
(Reporting by Sarah Morland; Editing by Brendan O’Boyle and Stephen Coates)
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