S&P Global Ratings has downgraded Empresas CMPC S.A.'s long-term rating to 'BBB-' from 'BBB' while keeping the outlook stable. The rating action stems from weaker-than-expected operating results and the company's difficulty in lowering leverage after a material earnings contraction in 2025.
Earnings and leverage trajectory
S&P's adjustments show CMPC's EBITDA fell to slightly below $1.1 billion in 2025, down from almost $1.5 billion in 2024. That deterioration contributed to a leverage ratio that peaked at 4.5x by the end of 2025. The rating agency attributes the decline in underlying earnings power primarily to continued weakness in pulp prices and heightened competition in regional tissue and personal care segments, notably in Brazil and Mexico.
Market dynamics pressuring margins
The average bleached eucalyptus kraft pulp (BEKP) price in China slid by 17% in 2025, according to S&P, a drop the agency connects to global trade tensions, an overcapacity of paper in China, and the country's rise in integrated pulp capacity. Those forces, S&P says, have produced more pronounced margin compression than initially expected for CMPC.
S&P projects some recovery in BEKP prices over the next two years, estimating an average of about $580 per ton in 2026 and $650 per ton in 2027 - up from $540 per ton in 2025. The agency's baseline for CMPC incorporates those price improvements as part of an easing in supply-demand imbalances.
Management actions and balance-sheet plans
CMPC's management has publicly outlined an asset monetization program that would include sales of land, forestry holdings and power generation assets. In its base-case, S&P factors in roughly $450 million of asset disposals occurring in 2026.
Using those assumptions, S&P forecasts S&P Global Ratings-adjusted EBITDA of $1.2 billion to $1.3 billion in 2026 and $1.4 billion to $1.5 billion in 2027, with leverage falling to close to 3.0x in 2026 and to about 2.5x in 2027. The agency's stable outlook reflects a view that, given somewhat improved market conditions and management's debt-reduction measures, leverage will trend down and remain compatible with the current rating over the next two years.
Capital expenditure decision looms
S&P also notes that CMPC is likely to approve the Natureza Project - a new BHKP pulp mill with capacity of 2.5 million tons per year and an estimated investment of $4.6 billion - in the first half of 2026. While the project is described by S&P as strategically important to CMPC's long-term competitiveness, the agency warns it would require further adjustments to the company's capital structure to avoid materially deviating from its financial policy.
Implications and outlook
In sum, the downgrade reflects a combination of near-term earnings pressure from cyclical and structural market forces, ongoing competition in key regional end-markets, and the balance-sheet impact of weaker 2025 results. S&P's forward-looking assumptions include partial price recovery for BEKP, proceeds from planned asset sales, and management actions aimed at reducing leverage, which together support the agency's view that CMPC's credit profile can be consistent with the downgraded rating over the coming two years.
Summary
S&P cut CMPC to 'BBB-' from 'BBB' with a stable outlook after adjusted EBITDA fell to just under $1.1 billion in 2025 from nearly $1.5 billion in 2024 and leverage peaked at 4.5x. The agency points to weak pulp prices - with BEKP down 17% in China in 2025 - and tougher regional competition as primary drivers. S&P forecasts gradual recovery in prices and earnings through 2027, incorporates about $450 million of asset sales in 2026, and notes the likely approval of the $4.6 billion Natureza pulp mill in H1 2026, which would necessitate additional capital-structure adjustments.