OPPORTUNITIES

DEVELOPING SYNERGIES

More than two years after the acquisition of new subsidiaries Britanite and Davey Bickford in 2015, Enaex continues developing important synergies to be leveraged in the short and medium-term. Britanite expanded the Company’s expertise in civil works and provided direct access to iron and aluminum markets in Brazil. Now operating under the name Enaex Britanite, both brands' characteristics and commercial relationships with the regional mining and civil works sectors will optimize the Company's image in Brazil. On the other hand, the addition of Davey Bickford—with its leadership in initiation systems and presence on almost all continents—grants the Company access to an international distribution network. The Company continues to reinforce its regional leadership through subsidiaries Enaex Argentina, Enaex Peru and Enaex Colombia, which provide complete, comprehensive rock fragmentation services.

INTERNATIONAL GROWTH

As the mining industry recovered, the Company developed new capabilities and investments by building plants in different markets where it operates and exporting innovative products and solutions.

THE COMPANY'S MULTIPLE INTEGRATION PROCESSES ENABLE GREATER

EMPLOYEE EXCHANGE PROGRAM

The Company offers an inter-subsidiary fixed-term employee exchange program in order to spread best practices and identify potential synergies within the group.

INNOVATION AND TECHNOLOGICAL DEVELOPMENT

The Company has developed a technology portfolio including products and processes through in-house development, licensing agreements and technology exchange with industry leaders. This culture of innovation has enabled Enaex to win several bidding processes with new customers and report increasingly better results. Furthermore, the Company’s subsidiary Davey Bickford has helped solidify its international leadership in mining innovation.

TRAINING TO IMPROVE PRODUCTIVITY

All employees have access to training and development programs that aim to help the Company meet high quality standards and maintain long-term relationships with all customers and suppliers. Furthermore, with the acquisition of Britanite, the Company managed to improve the efficiency of its logistics and supply processes.

RISK FACTORS

MARKET RISK

The Company is highly exposed to the region's copper mining industry, from which approximately 80% of revenue originates, directly or indirectly. Following the 2015 acquisitions, the Company benefited from diversification and vertical integration of its operations with greater presence in other mining markets within the region and technological markets for initiation systems around the world.

Furthermore, it is exposed to international price competition for ammonium nitrate, which depends on fluctuations in installed capacity, which affects both local and export sales.

CREDIT RISK

Revenue is tied to long-term relationships with regional customers renowned for their experience and solvency. According to corporate policy, credit insurance policies are purchased to cover the majority of customers in Chile and abroad with different risk. Even so, there are customers without coverage on certain markets where the Company operates, which implies possible credit risk.

THE COMPANY HAS A SOUND FINANCIAL POSITION. FELLER RATE RECENTLY UPGRADED ITS RATING (AA, STABLE OUTLOOK) WHILE FITCH RATING MAINTAINED ITS RATING (AA-, STABLE OUTLOOK) IN 2017.

ACCIDENT RISK

The Company holds insurance policies to cover physical loss to its property, losses due to resulting business interruptions, as well as civil liability.

INPUT AND PRODUCTION FACTOR RISK

The Company is impacted by variations in international ammonia prices, which are sensitive to oil and natural gas prices. To mitigate the risk of fluctuation in this input, customer contracts stipulate periodic rate adjustments based on indexation formulas that account for this product. Risks in fluctuations in the cost of other relevant production inputs, like oil or electricity, are also covered using indexation formulas.

FINANCIAL RISK

The Company manages currency, interest rate and working capital financing risk. In exchange rate risk, in 2009 the Company established the US dollar as its functional currency because the majority of its commercial operations and investments are in that currency.

Likewise, its financial obligations (both short and long-term) are primarily secured in that currency in order to reduce the exchange rate risk on cash flows and earnings. Since the local currency remains the functional currency of some subsidiaries, Enaex has some exposure to exchange rate fluctuations, primarily the euro and the Brazilian real. Thus, the Company maintains currency and interest rate swaps.