UNITED STATES OF AMERICA
SECURITITES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 or 15d-16
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the month of August 2003
QUINENCO S.A.
(Exact name of registrant as specified in charter)
QUINENCO, INC.
(Translation of registrant's name into English)
Quinenco S.A.
Enrique Foster Sur 20, 14th Floor
Santiago, Republic of Chile
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12(g)3-2(b) under the Securities Act of 1934
Yes |_| No |X|
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12(g)3-2(b): ___________
The following document is being filed with this 6-K report and is
attached hereto.
Press Release dated 28 August 2003 announcing second quarter 2003 consolidated
results.
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Second quarter 2003
================================================================================
FOR IMMEDIATE RELEASE
For further information contact:
Quinenco S.A.
Cindi Freeman-IRO
(56-2) 750-7221
e-mail: cfreeman@lq.cl
QUINENCO S.A. ANNOUNCES CONSOLIDATED
RESULTS FOR THE SECOND QUARTER OF 2003
(Santiago, Chile, August 28, 2003) Quinenco S.A. (NYSE:LQ), a leading Chilean
business conglomerate, announced today its consolidated financial results in
Chilean GAAP, for the second quarter ended June 30, 2003.
Consolidated financial results are presented in accordance with Chilean GAAP.
All figures are presented in constant Chilean pesos and have been adjusted to
reflect the effects of inflation (3.5% year-over-year). Figures in US$ have been
converted from Chilean pesos (Ch$) at the observed exchange rate on June 30,
2003 (Ch$699.12 = US$1.00) and are only provided for the reader's convenience.
--------------------------------------------------------------------------------
2Q 2003 HIGHLIGHTS
o Quinenco reported net income of Ch$132 million (US$0.2 million) for the
second quarter of 2003, reverting the net loss of Ch$9,521 million
(US$13.6 million) it reported in 2Q 2002. YTD net earnings amount to
Ch$40,364 million (US$57.7 million).
o Consolidated revenues declined by 11.0% to Ch$92,598 million (US$132.4
million) in 2Q 2003.
o Operating profit increased by 12.0% to Ch$5,021 million (US$7.2 million),
in spite of the reduction in the consolidated sales level, primarily
attributable to a marked improvement in Madeco's operating performance
during the second quarter.
o Non-operating losses were reduced by Ch$7,511 million (US$10.7 million) to
Ch$10,071 million (US$14.4 million) in 2Q 2003. The improvement was, in
large part, due to a significant increase in earnings related to
Quinenco's interest in Banco de Chile, which following the close of its
merger, rose by 139% compared to the same period in 2002. In addition,
interest expense dropped sharply by 34.5%, also contributing to the
reduction in non-operating losses.
o Earnings per ADR for the six month period amount to US$0.53 as of June 30,
2003.
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Page 1 of 16
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QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
================================================================================
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Second quarter 2003
================================================================================
GROUP HIGHLIGHTS - SECOND QUARTER 2003 AND SUBSEQUENT EVENTS
Quinenco
On April 17, 2003, Heineken Americas B.V., a subsidiary of Heineken
International B.V., entered into partnership with Quinenco in Inversiones y
Rentas S.A. (IRSA), in accordance with the terms and conditions of the amended
shareholders' agreement with Quinenco reached in January 2003. IRSA is the
controlling entity of CCU with a 61.6% interest.
On April 10, 2003, Quinenco announced that its wholly-owned subsidiary,
Hidroindustriales Overseas Company, had obtained a US$19 million loan from
Andsberg Finance Corporation Ltd., a financial entity organized under the laws
of Bermuda, related to Quinenco's controlling shareholder, Mr. Andronico Luksic
Abaroa.
CCU
Pursuant to an extraordinary shareholders' meeting held on February 26, 2003,
shareholders agreed to an extraordinary dividend totaling Ch$168,700 million,
payable in multiple payments before October 31, 2003. Following the first
dividend distribution of Ch$56,375 million (Ch$177 per share) in March, CCU will
make two additional payments for Ch$74,848 million (Ch$235 per share) and
Ch$37,477 million (Ch$117.7 per share) on August 29th and October 10th,
respectively. Quinenco's proportionate share of the extraordinary dividend
payments is 30.8%.
Madeco
In public share auctions held on the Santiago Stock Exchange on June 6th and
August 20th, Madeco sold an additional 1,422 million shares of its stock from
the unsubscribed portion previously approved in November of 2002 and not sold in
March. Proceeds, which amounted to Ch$40,082 million (approximately US$57
million), will be used to further reduce company indebtedness and provide
additional working capital. Quinenco did not subscribe to any additional shares.
As a result, its interest in Madeco was reduced from 76.8% to 56.7% as of August
20th .
Hoteles Carrera
On August 14, 2003, Hoteles Carrera announced that it was negotiating the sale
or lease with a purchase option of its Santiago flagship hotel with the Chilean
Ministry of Foreign Relations. On August 27, 2003, Hoteles Carrera signed a
purchase option and a leasing with purchase option agreement with the state
whereby Hoteles Carrera granted to the Chilean state an option to purchase the
building and grounds prior to February 29, 2004 for UF832,000. If the option is
not exercised, the parties shall enter into a long-term leasing agreement with
an option to purchase at the end of the term.
Page 2 of 16
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QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
================================================================================
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Second quarter 2003
================================================================================
Net Income Contribution
------------------------------------------------------------------------------------------------------------------------
Quinenco's
ownership % 2Q 2002 1Q 2003 2Q 2003 2Q 2003 YTD 2002 YTD 2003
Sector/Company at 6/30/2003 MCh$ MCh$ MCh$ MUS$ MCh$ MCh$
------------------------------------------------------------------------------------------------------------------------
Financial Services:
Banco de Chile (1) 52.2% 4,351 9,155 10,227 14.6 8,228 19,383
------------------------------------------------------------------------------------------------------------------------
Food & Beverage:
CCU (1) 30.8% (871) 10,122 (301) (0.4) 2,556 9,821
Lucchetti (1) 93.7% (437) (658) (155) (0.2) (1,740) (814)
------------------------------------------------------------------------------------------------------------------------
Telecommunications:
Telsur (1) 73.6% 1,391 1,283 1,166 1.7 2,593 2,449
Entel (2) 5.7% 384 1,116 600 0.9 1,132 1,716
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Manufacturing:
Madeco (1) 76.8% (3,961) (4,297) 16 0.0 (9,955) (4,281)
------------------------------------------------------------------------------------------------------------------------
Real estate/hotel admin.:
Carrera (1) 89.9% (454) (73) (355) (0.5) (755) (428)
Habitaria (1) 50.0% 217 (212) (35) (0.1) 45 (247)
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Total operating companies 620 16,436 11,163 16.0 2,104 27,599
------------------------------------------------------------------------------------------------------------------------
Quinenco & holding companies (10,140) 23,796 (11,031) (15.8) (20,748) 12,765
------------------------------------------------------------------------------------------------------------------------
Total (9,520) 40,232 132 0.2 (18,644) 40,364
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The figures provided in the above table correspond to Quinenco's proportional
share of each company's net income (loss).
(1) Operating company in which Quinenco has direct or indirect control.
(2) Operating company in which Quinenco holds a minority interest.
Net Income - 2Q 2003
Quinenco reported a net profit for the second quarter of 2003 of
Ch$132 million (US$0.2 million), compared to a net loss of Ch$9,520
million (US$13.6 million) in the second quarter of 2002. The
improvement in quarterly earnings performance was primarily
attributable to a higher net income contribution from Quinenco's
main operating companies, particularly Banco de Chile and Madeco.
Earnings per ordinary share amounted to Ch$0.12 and earnings per
ADR, Ch$1.2 (US$0.0).
Page 3 of 16
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QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
================================================================================
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Second quarter 2003
================================================================================
Consolidated Income Statement Breakdown
---------------------------------------------------------------------------------------------------------
2Q 2002 1Q 2003 2Q 2003 2Q 2003 YTD 2002 YTD 2003
MCh$ MCh$ MCh$ MUS$ MCh$ MCh$
---------------------------------------------------------------------------------------------------------
Revenues
---------------------------------------------------------------------------------------------------------
Madeco 66,560 62,417 61,982 88.7 132,773 124,399
Lucchetti 23,630 14,486 15,790 22.6 42,847 30,276
Telsur 11,931 12,716 12,817 18.3 23,819 25,533
Carrera 1,711 1,669 1,411 2.0 3,516 3,079
Quinenco & holding 200 435 598 0.8 385 1,033
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Total 104,032 91,723 92,598 132.4 203,340 184,320
---------------------------------------------------------------------------------------------------------
Operating income (loss)
---------------------------------------------------------------------------------------------------------
Madeco 1,811 2,178 3,385 4.8 4,040 5,562
Lucchetti 1,804 298 993 1.4 2,413 1,292
Telsur 3,334 3,058 3,006 4.3 6,208 6,064
Carrera (211) -- (282) (0.4) (408) (282)
Quinenco & holding (2,254) (2,212) (2,081) (2.9) (4,406) (4,294)
---------------------------------------------------------------------------------------------------------
Total 4,484 3,322 5,021 7.2 7,847 8,342
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Non-operating income (loss)
---------------------------------------------------------------------------------------------------------
Interest income 2,003 761 840 1.2 3,765 1,600
Share of net income/loss
from related co:
Banco de Chile 4,351 9,155 10,227 14.6 8,228 19,383
CCU (871) 10,122 (301) (0.4) 2,556 9,821
Habitaria 217 (212) (35) (0.1) 45 (247)
Entel 384 1,116 600 0.9 1,132 1,716
Other equity inv (131) (276) (235) (0.3) (196) (512)
Other non-op income 3,808 36,416 548 0.8 4,342 36,964
Amort. of GW expense (5,181) (5,197) (5,114) (7.3) (10,495) (10,310)
Interest expense (13,889) (10,317) (9,094) (13.0) (28,491) (19,410)
Other non-op expenses (3,751) (4,578) (7,472) (10.7) (7,959) (12,050)
Price-level restatement (4,522) (148) (35) (0.1) (10,036) (183)
---------------------------------------------------------------------------------------------------------
Total (17,582) 36,842 (10,071) (14.4) (37,109) 26,772
---------------------------------------------------------------------------------------------------------
Income Tax (644) (867) (736) (1.0) 775 (1,604)
Extraordinary items -- -- -- -- -- --
Minority Interest 4,009 359 (455) (0.7) 9,392 (95)
Amort. of neg. GW 212 576 6,373 9.1 451 6,949
---------------------------------------------------------------------------------------------------------
Net income (loss) (9,521) 40,232 132 0.2 (18,644) 40,364
---------------------------------------------------------------------------------------------------------
Revenues - 2Q 2003
Consolidated revenues for the second quarter of 2003 were Ch$92,598
million (US$132.4 million), 11.0% lower than the Ch$104,032 million
(US$148.8 million) registered in the second quarter of 2002, mainly
due to a decrease of 6.9% in Madeco's sales level and a 33.2%
decrease in Lucchetti's sales, partially offset by a 7.4% increase
in Telsur's sales during the period. Consolidated sales can be
broken down as follows: Madeco (66.9%), Lucchetti (17.1%), Telsur
(13.8%), Carrera (1.5%) and others (0.7%).
Page 4 of 16
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QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
================================================================================
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Second quarter 2003
================================================================================
Operating Income - 2Q 2003
Operating income for the second quarter of 2003 was Ch$5,021 million
(US$7.2 million), up by 12.0% from the Ch$4,484 million (US$6.4
million) reported in the second quarter of 2002. Consolidated
operating income increased as a result of higher operating profit
attributable to Madeco's operations, partially offset by a decrease
in the operating results of Lucchetti, and to a lesser extent,
Telsur and Hoteles Carrera.
EBITDA - 2Q 2003
EBITDA reached Ch$12,528 million (US$17.9 million) in 2Q 2003,
compared to Ch$12,210 million (US$17.5 million) in 2Q 2002.
Non-Operating Results -2Q 2003
Quinenco reported a non-operating loss of Ch$10,071 million (US$14.4
million) in the second quarter of 2003, compared to a non-operating
loss of Ch$17,582 million (US$25.1 million) in the same quarter of
2002. The main items included in non-operating results are discussed
below:
o Proportionate share of net income of equity method investments (net)
Quinenco's proportionate share of net income from equity method
investments (net), which includes the results from Banco de Chile
and CCU, two of Quinenco's most significant investments, reached
Ch$10,256 million (US$14.7 million), compared to Ch$3,950 million
(US$5.7 million) in 2Q 2002, an increase of 159.6%. The increase
mainly corresponded to increases in the proportionate share of net
income from Banco de Chile. Banco de Chile's net profit in 2Q 2003,
following the conclusion of its merger process at year end 2002,
reached Ch$35,275 million (US$50.5 million) of which Quinenco's
share was 29.2%.
o Other non-operating income
Other non-operating income was Ch$548 million (US$0.8 million),
compared to Ch$3,808 million (US$5.4 million) in the second quarter
of 2002. The variation is explained by the reversal of provisions
made in prior periods in the second quarter of 2002.
o Amortization of goodwill expense
Amortization of goodwill expense amounted to Ch$5,114 million
(US$7.3 million) in the second quarter of 2003, almost unchanged
from the Ch$5,181 million (US$7.4 million) reported in the same
period in 2002. Goodwill expense is almost entirely related to the
Banco de Chile acquisition in 2001, and to a lesser extent, the
Banco Edwards acquisition in 1999 (now kept on the books as Bank of
Chile). Of the total balance of goodwill at the consolidated level
of Ch$342,184 million (US$489.5 million) as of June 30, 2003,
Ch$306,470 million (US$438.4 million) was associated with the Banco
de Chile acquisition. Goodwill is amortized using the straight-line
method over twenty years.
Page 5 of 16
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QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
================================================================================
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Second quarter 2003
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o Interest Expense
Interest expense for the second quarter of 2003 amounted to Ch$9,094
million (US$13.0 million), a decrease of 34.5% compared to the same
period in 2002. The decrease is primarily associated with a lighter
consolidated debt load at Madeco, the non-consolidation of
Lucchetti's Peruvian operations and lower prevailing interest rates.
o Other non-operating expenses
Other non-operating expenses amounted to Ch$7,472 million (US$10.7
million), compared to Ch$3,751 million (US$5.4 million) reported in
the same quarter in 2002. The main item comprising other
non-operating expenses was the loss associated with the
non-subscription of additional shares of Madeco in June (Ch$5,809
million, US$8.3 million). Worth mentioning is that the effect of the
non-subscription was totally offset by a credit to income for
extraordinary amortization of negative goodwill associated with
Quinenco's interest in Madeco's capital increase for Ch$5,809
million (US$8.3 million) in the second quarter of 2003 (included
with negative goodwill which totaled Ch$6,373 million, (US$9.1
million) in 2Q 2003).
o Price-level restatement and foreign currency translation losses
(net)
Price-level restatement and foreign currency translation losses
(net) were Ch$35 million in the second quarter of 2003, compared to
losses of Ch$4,522 million (US$6.5 million) in the same period in
2002. Foreign currency translation gains amounted to Ch$2,616
million (US$3.7 million) in 2Q 2003, compared to foreign currency
translation losses of Ch$5,590 million (US$8.0 million) in the same
period in 2002. In both quarters, the results from foreign currency
translations mostly corresponded to Madeco's operations. In 2Q 2002,
Madeco's foreign currency translation losses were associated with
the devaluation of the Brazilian real and Argentine peso vis-a-vis
the US dollar. In 2Q 2003, foreign currency translation gains
corresponded to the revaluation of the Brazilian real and the
reduction of Madeco's exposure to liabilities maintained in US
dollars following Madeco's debt restructuring. Price level
restatement losses amounted to Ch$2,652 million (US$3.8 million) in
2Q 2003 compared to price-level restatement gains of Ch$1,068
million (US$1.5 million) reported in the same quarter in 2002,
reflecting the loss in the purchasing power of the Chilean peso
during the period.
Income Taxes - 2Q 2003
Quinenco reported income taxes of Ch$736 million (US$1.1 million),
compared to income taxes of Ch$644 million (US$0.9 million) during
the same period of 2002.
Minority Interest - 2Q 2003
In the second quarter of 2003, Quinenco deducted from income Ch$455
million (US$0.7 million) compared to an add-back to income of
Ch$4,009 million (US$5.7 million) in 2Q 2002. The amount is mainly
related to minority shareholders' proportionate share of Madeco's
second quarter results in both years.
Page 6 of 16
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QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
================================================================================
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Second quarter 2003
================================================================================
Condensed Consolidated Balance Sheet
----------------------------------------------------------------------------------------------
As of As of As of As of
6/30/02 3/31/03 6/30/03 6/30/03
MCh$ MCh$ MCh$ MUS$
----------------------------------------------------------------------------------------------
Current assets 303,628 273,717 263,626 377.1
Fixed assets 440,844 391,927 378,281 541.1
Other assets 869,488 853,482 834,612 1,193.8
----------------------------------------------------------------------------------------------
Total assets 1,613,960 1,519,126 1,476,519 2,112.0
----------------------------------------------------------------------------------------------
Current liabilities 274,084 215,886 232,100 332.0
Long-term liabilities 568,604 566,778 504,788 722.0
Minority interest 87,205 57,979 68,806 98.5
Shareholders' equity 684,067 678,483 670,825 959.5
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Total liabilities & shareholders' equity 1,613,960 1,519,126 1,476,519 2,112.0
----------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET ANALYSIS (vis-a-vis the 1st quarter of 2003)
Current Assets
Current assets decreased 3.7% compared to the first quarter of 2003,
mainly due to a reduction in repurchase agreements, partially offset
by an increase in short-term deposits.
Fixed Assets and Other Assets
Fixed assets decreased 3.5% compared to the first quarter of 2003,
mostly due to the reappraisal and subsequent write-down of Madeco's
sheet plant in Argentina in the last quarter. Other assets did not
vary significantly compared to the first quarter of 2003.
Current Liabilities
Current liabilities increased 7.5% compared to the first quarter of
2003, mostly reflecting debt paydown at Madeco and at the Quinenco
corporate level as well as the reclassification of debt maturities
within the next 12 months to short-term banks.
Long-term Liabilities
Long-term liabilities decreased 10.9% compared to the first quarter
of 2003, mainly attributable to debt paydown at Madeco and the
Quinenco corporate level as well as the reclassification of debt
maturities within the next 12 months to short-term bank obligations.
Minority Interest
Minority interest increased by 18.7% compared to the first quarter
of 2003, mainly attributable to the minority interest corresponding to Madeco.
Equity
Shareholders' equity decreased by 1.1% compared to the first quarter
of 2003.
Page 7 of 16
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QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
================================================================================
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Second quarter 2003
================================================================================
Quinenco Corporate Level
As of June 30, 2003, financial debt at the corporate level was Ch$377,526
million (US$540.0 million). As of the same date, cash and cash equivalents
amounted to approximately Ch$67,069 million (US$95.9 million). The debt to total
capitalization ratio at the corporate level was 35.9%.
RETURN ON CAPITAL EMPLOYED (ROCE)
With the aim of focusing on creating value for Quinenco's shareholders as well
as an indicative measurement of operating company results, the following table
indicates the return on capital employed (ROCE) at each of Quinenco's main
operating companies (excluding Banco de Chile):
--------------------------------------------------------------------------------
For the 12 months ended 6/30/03 ROCE (1)
--------------------------------------------------------------------------------
Madeco 1.6%
Telsur 9.5%
Lucchetti 4.4%
Carrera -0.2%
CCU (2) 7.6%
Habitaria 4.8%
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(1) Adjusted operating return over capital employed for the last 12 months.
(2) Not including the extraordinary gain on sale of the Karlovacka brewery in
2003. ROCE including the extraordinary sale increases to 12%.
Page 8 of 16
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QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
================================================================================
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Second quarter 2003
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SECTOR /OPERATING COMPANY ANALYSIS
FINANCIAL SERVICES SECTOR
The following table details Quinenco's proportional share of income from
investments in the Financial Services sector during 2002 and 2003:
--------------------------------------------------------------------------------------------------
FINANCIAL SERVICES
--------------------------------------------------------------------------------------------------
Ownership 2Q 2002 YTD 2002 1Q 2003 2Q 2003 2Q 2003 YTD 2003
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$
--------------------------------------------------------------------------------------------------
Banco de Chile (1) 52.2% 4,351 8,228 9,155 10,227 14.6 19,383
--------------------------------------------------------------------------------------------------
1) Ownership % corresponds to voting rights. Quinenco's proportionate share
of Banco de Chile's income is calculated according to economic ownership
percentages in Banco de Chile (20.2%) and SM Chile (51.4%).
BANCO DE CHILE
---------------------------------------------------------------------------------------------------------------------
Banco de Chile Quarter Accumulated for Year
---------------------------------------------------------------------------------------------------------------------
2Q 2002 2Q 2003 2Q 2003 YTD 2002 YTD 2003 YTD 2003
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
---------------------------------------------------------------------------------------------------------------------
Operating revenues 116,383 113,658 162.6 218,406 217,170 310.6
Provision for loan losses (34,228) (16,920) (24.2) (69,384) (30,241) (43.3)
Operating expenses (59,759) (57,178) (81.8) (119,280) (112,522) (160.9)
Net Income (loss) 14,767 35,275 50.5 27,863 66,491 95.1
---------------------------------------------------------------------------------------------------------------------
Loan portfolio 6,234,258 6,233,791 8,916.6
Total assets 9,255,664 9,292,188 13,291.3
Shareholders' equity 585,424 635,137 908.5
---------------------------------------------------------------------------------------------------------------------
Net interest margin 5.2% 3.1%
Net Financial Margin 4.3% 4.1%
Efficiency ratio 51.4% 50.3%
ROAE 10.2% 22.4%
ROAA 0.6% 1.6%
---------------------------------------------------------------------------------------------------------------------
2Q 2003 Results
Operating revenues declined by 2.3% to Ch$113,658 million (US$162.6 million) in
the second quarter of 2003, mainly due to an 8.3% reduction in net financial
income earned during the period. Net financial income which is calculated as the
sum of net interest revenue and foreign exchange transactions (net), comprised
74.0% of operating revenues in 2Q 2003. The reduction in net financial income to
Ch$84,086 million (US$120.3 million ) was due to a reduction in the bank's
average interest earning assets, lower repricing benefits and lower lending
spreads as a result of lower nominal interest rates in 2Q 2003. In addition,
lower gains reported on financial instruments (net) also contributed to the
decline in operating revenues for the second quarter, although a strong increase
in fee income, which rose by 43% to Ch$26,843 million (US$38.4 million), largely
offset the decline in operating revenues. Fee income increased as a result of
higher income earned in relation with the corporate and retail segments of the
bank, stock brokerage services as well as the incorporation of fee income from
the bank's debt collection subsidiary.
Page 9 of 16
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QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
================================================================================
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Second quarter 2003
================================================================================
Provisions for loan losses, which amounted to Ch$16,920 million (US$24.2
million), showed a significant decrease from the Ch$34,228 million (US$49.0
million) reported in the second quarter of 2002, reflecting a more positive
economic scenario as well as a 4.1% revaluation of the Chilean peso vis-a-vis
the US dollar. Provisions for loan losses, which were particularly high in the
second quarter of 2002, corresponded to the establishment of a cohesive and
strict credit policy on loans as part of the overall merger process.
Operating expenses fell by 4.3% to Ch$57,178 million (US$81.8 million) compared
to the second quarter of 2002 when operating expenses included costs relative to
the merger process, most importantly, severance payments, write-offs of obsolete
software and branch closing costs. These reductions were partially offset by the
incorporation of the debt collection subsidiary to the bank's cost base and
higher personnel expenses.
Net income for 2Q 2003 was Ch$35,275 million (US$50.5 million), a increase of
nearly 139% from the Ch$14,767 million (US$21.1 million) reported in the second
quarter of 2002. The increase in net quarterly earnings was the result of the
aforementioned decrease in provisions for loan losses, a sharp rise in the
recovery of assets charged off in previous periods, a reduction in operating
expenses following the conclusion of the merger process and a significant
increase in the amount of fee income earned during the second quarter of the
year.
As of June 2003, the Bank's loan portfolio had remained stable when compared to
the previous twelve month period. Loan activity has been strongest in the middle
market and high income individuals segments. Banco de Chile has reduced its
exposure in the lower-middle income individuals and large corporations segments.
Banco de Chile was the second ranked private bank in the country with a market
share of 18.3% according to information published by the Chilean Superintendency
of Banks for the period ended June 30, 2003. Its return on capital and reserves
(annualized for the twelve-month period) reached 23.4%, amply surpassing the
16.8% return for the local financial system, according to the same source.
Page 10 of 16
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QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
================================================================================
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Second quarter 2003
================================================================================
FOOD & BEVERAGE SECTOR
The following table details Quinenco's proportional share of income (loss) from
investments in the Food & Beverage sector during 2002 and 2003:
----------------------------------------------------------------------------------------------
FOOD & BEVERAGE
----------------------------------------------------------------------------------------------
Ownership 2Q 2002 YTD 2002 1Q 2002 2Q 2003 2Q 2003 YTD 2003
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$
----------------------------------------------------------------------------------------------
CCU 30.8% (871) 2,556 10,122 (301) (0.4) 9,821
Lucchetti 93.7% (437) (1,740) (658) (155) (0.2) (814)
----------------------------------------------------------------------------------------------
CCU
-----------------------------------------------------------------------------------------------------------
CCU Quarter Accumulated for Year
-----------------------------------------------------------------------------------------------------------
2Q 2002 2Q 2003 2Q 2003 YTD 2002 YTD 2003 YTD 2003
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
-----------------------------------------------------------------------------------------------------------
Sales 69,772 77,162 110.4 166,209 177,869 254.4
Operating income (loss) 951 983 1.4 18,160 16,358 23.4
Net Income (loss) (2,828) (976) (1.4) 8,303 31,897 45.6
-----------------------------------------------------------------------------------------------------------
Total Assets 625,677 665,364 951.7
Shareholders' equity 430,157 278,268 398.0
-----------------------------------------------------------------------------------------------------------
2Q 2003 Results
CCU's second quarter consolidated sales grew by 10.6% compared to the second
quarter of 2002 due to an increase of 9.1% in consolidated sales volumes and a
0.9% increase in average prices. The growth in sales volume was led by the beer
segments, both in Chile and Argentina (3.9% and 24.7%, respectively) domestic
wines (2.5%) and soft drinks (2.4%). In addition, Finca La Celia, Vina San
Pedro's subsidiary in Argentina, began to consolidate its operations with San
Pedro in January of this year which also served to increase the volume sold. The
total volume sold was partially offset by a sharp decline in export wine
volumes, which fell by 8.6% in the second quarter. The increase in average
prices was attributable to the beer segments in Chile and Argentina which
experienced increases of 4.8% and 18.2%, respectively. The increase in average
prices was partially offset by lower wine prices (-15.7%) as a result of large
bulk exports and lower domestic prices, and a slight drop of 0.9% in the average
price of soft drinks.
Operating income rose by 3.3% in the second quarter to Ch$983 million (US$1.4
million), mainly as a result of the higher sales level, which translated
directly into an increase of 10.6% in CCU's gross profit, partially offset by a
10.8% increase in SG&A expenses. SG&A expenses were affected by higher marketing
expenses incurred in the beer and wine segments as well as the newly launched
pisco segment. The operating margin as a percentage of sales fell from 1.4% in
the second quarter of 2002 to 1.3% in 2Q 2003.
Non-operating losses increased from Ch$1,408 million (US$2.0 million) in 2Q 2002
to Ch$1,665 million (US$2.4 million) in 2Q 2003. The increase in non-operating
losses in the second quarter of the year was mostly attributable to the absence
of results from the Croatian affiliate, Karlovacka, which was sold at the end of
March, fixed asset write-offs, dividend expenses and a higher level of interest
expense, the effects of which were partially offset by gains related to
price-level restatements and exchange rate differences.
Page 11 of 16
================================================================================
QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
================================================================================
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Second quarter 2003
================================================================================
CCU reported a net loss in 2Q 2003 of Ch$976 million (US$1.4 million), a
substantial improvement over the loss of Ch$2,828 million (US$4.0 million)
reported in the same period of 2002. The reduction in the quarterly net loss was
mainly due to lower income taxes and a reduction in minority interest related to
Vina San Pedro`s operation, the effects of which were partially offset by the
aforementioned increase in non-operating losses incurred during the period.
LUCCHETTI
-----------------------------------------------------------------------------------------------------------
Lucchetti Quarter Accumulated for Year
-----------------------------------------------------------------------------------------------------------
2Q 2002 2Q 2003 2Q 2003 YTD 2002 YTD 2003 YTD 2003
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
-----------------------------------------------------------------------------------------------------------
Sales 23,630 15,790 22.6 42,847 30,276 43.3
Operating income (loss) 1,804 993 1.4 2,413 1,292 1.8
Net Income (loss) (466) (166) (0.2) (1,857) (868) (1.2)
-----------------------------------------------------------------------------------------------------------
Total Assets 126,935 74,427 106.5
Shareholders' equity 51,461 15,480 22.1
-----------------------------------------------------------------------------------------------------------
2Q 2003 Results
Lucchetti reported sales of Ch$15,790 million (US$22.6 million) in the second
quarter of 2003, down 33.2% compared to the same period in 2002. The decrease in
sales is attributable to the closure of the Peruvian operations in early January
2003 (Ch$5,782 million, US$8.3 million), and to a lesser extent, a reduction in
Lucchetti's sales in Chile (Ch$2,058 million, US$2.9 million) compared to the
same period in 2002. Lucchetti's operations in Chile were affected by a
pronounced drop of Ch$2,561 million (US$3.7 million) in the sales of edible oils
due to a flood of low priced imports from Argentina. The reduction in edible oil
sales was partially offset by a 5.3% increase in the sale of pastas (Ch$9,036
million, US$12.9 million), and a 7% increase in soups, broths and creams
(Ch$1,134 million, US$1.6 million). Sales for 2Q 2003 can be broken down as
follows: pasta (57.2%), edible oils (35.6%), soups, broths and creams (7.2%).
Operating profit, equivalent to 6.3% of sales, declined by Ch$811 million
(US$1.2 million) to Ch$993 million (US$1.4 million), mostly attributable to the
low margins associated with edible oils. The effect of the closure of the
Peruvian plant on operating results was negligible.
Non-operating losses amounted to Ch$1,071 million (US$1.5 million), a
significant reduction from the Ch$2,425 million (US$3.5 million) reported in 2Q
2002. The decrease in non-operating losses was attributable to a decline in
interest expense from Ch$1,403 million (US$2.0 million) in 2Q 2002 to Ch$819
million (US$1.2 million) in 2Q 2003 owing to the non-consolidation of Lucchetti
Peru and low prevailing interest rates. In addition, Lucchetti reported a
reduction in non-operating expenses of Ch$516 million (US$0.7 million) in
relation to legal expenses incurred with the defense of its Peruvian plant
during 2002. Price-level restatement losses fell from Ch$906 million (US$1.3
million) in 2Q 2002 to Ch$255 million (US$0.4 million), also contributing to an
improvement in non-operating results for the period.
Lucchetti reported a net loss of Ch$166 million (US$0.2 million) compared to a
net loss of Ch$466 million (US$0.7 million) in the same period of 2002. The
reduction in Lucchetti's net loss was primarily attributable to lower
non-operating expenses, the effect of which was partially offset by the decline
in operating profit in the second quarter of the year.
Page 12 of 16
================================================================================
QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
================================================================================
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Second quarter 2003
================================================================================
TELECOMMUNICATIONS SECTOR
The following table details Quinenco's proportional share of income from
investments in the Telecommunications sector during 2002 and 2003:
--------------------------------------------------------------------------------------------
TELECOMMUNICATIONS
--------------------------------------------------------------------------------------------
Ownership 2Q 2002 YTD 2002 1Q 2003 2Q 2003 2Q 2003 YTD 2003
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$
--------------------------------------------------------------------------------------------
Telsur 73.6% 1,391 2,593 1,283 1,166 1.7 2,449
Entel (1) 5.7% 384 1,132 1,116 600 0.9 1,716
--------------------------------------------------------------------------------------------
(1) Non-controlling interest.
TELSUR
-----------------------------------------------------------------------------------------------------------
Telsur Quarter Accumulated for Year
-----------------------------------------------------------------------------------------------------------
2Q 2002 2Q 2003 2Q 2003 YTD 2002 YTD 2003 YTD 2003
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
-----------------------------------------------------------------------------------------------------------
Sales 11,931 12,817 18.3 23,819 25,533 36.5
Operating income (loss) 3,334 3,006 4.3 6,208 6,064 8.7
Net Income (loss) 1,891 1,584 2.3 3,525 3,329 4.8
-----------------------------------------------------------------------------------------------------------
Total Assets 137,139 138,297 197.8
Shareholders' equity 57,749 59,833 85.6
-----------------------------------------------------------------------------------------------------------
2Q 2003 Results
Telsur's sales increased by 7.4% to Ch$12,817 million (US$18.3 million) in the
second quarter of 2003, mainly due to the consolidation of internet, security
and other services. This increase more than offsets the decline in basic
telephony service revenues associated with the substitution of fixed telephony
for mobile telephony alternatives as well as a drop in revenues from long
distance services.
In spite of the increase in sales, Telsur's operating profit fell by 9.9% to
Ch$3,006 million (US$4.3 million) in the second quarter of 2003, mainly as a
result of a drop in the gross margin associated with basic telephony services.
In addition, the higher depreciation expense associated with the internet,
security and call center services also served to reduce quarterly operating
profit.
Telsur reported non-operating losses increased by Ch$44 million (US$0.1 million)
to Ch$1,000 million (US$1.4 million) in 2Q 2003. The slight increase in
non-operating losses was mainly related to a lower level of non-operating income
and interest income compared to the second quarter of 2002, the effect of which
was partially offset by a reduction in interest expense due to low prevailing
interest rates and lower non- operating expenses.
Telsur reported net income of Ch$1,584 million (US$2.3 million), down by 16.2%
compared to the same period in 2002, attributable to the aforementioned
reduction in operating profits experienced during the period.
Page 13 of 16
================================================================================
QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
================================================================================
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Second quarter 2003
================================================================================
MANUFACTURING SECTOR
The following table details Quinenco's proportional share of income (loss) from
investments in the Manufacturing sector during 2002 and 2003:
------------------------------------------------------------------------------------------
MANUFACTURING
------------------------------------------------------------------------------------------
Ownership 2Q 2002 YTD 2002 1Q 2003 2Q 2003 2Q 2003 YTD 2003
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$
------------------------------------------------------------------------------------------
Madeco 76.8% (3,961) (9,955) (4,297) 16 -- (4,281)
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MADECO
---------------------------------------------------------------------------------------------------
Madeco Quarter Accumulated for Year
---------------------------------------------------------------------------------------------------
2Q 2002 2Q 2003 2Q 2003 YTD 2002 YTD 2003 YTD 2003
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
---------------------------------------------------------------------------------------------------
Sales 66,560 61,982 88.7 132,773 124,399 177.9
Operating income (loss) 1,811 3,385 4.8 4,040 5,562 8.0
Net Income (loss) (7,061) 17 -- (17,742) (5,080) (7.3)
---------------------------------------------------------------------------------------------------
Total assets 415,465 387,049 553.6
Shareholders' equity 118,709 152,394 218.0
---------------------------------------------------------------------------------------------------
2Q 2003 Results
Madeco's sales level in the second quarter of 2003 fell by 6.9% from Ch$66,560
million (US$95.2 million) to Ch$61,982 million (US$88.7 million). The decrease
was attributable to lower sales of the wire and cable business unit, which was
partially offset by sales increases in Madeco's other three business units. Wire
and cable sales in Brazil continued to be hampered by low demand by the telecom
and energy sectors in the second quarter of the year. In addition, export sales
of wire and cable products fell from both Chile and Peru, which served to
further pull down the business unit's sales for the period. Sales of the wire
and cable business unit (whose principal operation is Ficap Brazil) accounted
for 45.4% of total sales, followed by brass mills (23.2%), flexible packaging
(18.1%) and aluminum profiles (13.3%).
In spite of the decrease in quarterly sales, operating income was up strongly by
86.9% to Ch$3,385 million (US$4.8 million), mainly as the result of 22.4% lower
SG&A expenses, mainly related to the wire and cable business unit. The wire and
cable business unit contributed 21.5% of total operating profit despite a 31.4%
decline in sales it experienced in Brazil, its main operation, during the
period. Worth noting is that in 2Q 2002, the wire and cable business unit
reported an operating loss of Ch$1,041 million (US$1.5 million) even though its
sales during that quarter were 18.2% higher than in the second quarter of this
year, reflecting the efficiency gains made quarter over quarter. As a percentage
of sales, the operating margin improved from a mere 2.7% in 2Q 2002 to 5.5% in
2Q 2003.
Non-operating losses were cut by 67.9% to Ch$3,159 million (US$4.5 million)
versus Ch$9,849 million (US$14.1 million) one year ago. The decrease in
non-operating losses was mainly attributable to foreign currency translation
gains which amounted to Ch$1,261 million (US$1.8 million) and were related to
the revaluation of the Chilean and Brazilian peso vis-a-vis the US dollar. In
addition, Madeco reported a sharp reduction in interest expense of 35.3% to
Ch$3,393 million (US$4.9 million), which resulted from a reduction in bank debt
using proceeds received in the capital increase as well as low prevailing
interest rates.
Page 14 of 16
================================================================================
QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
================================================================================
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Second quarter 2003
================================================================================
The net income for the second quarter of 2003 was Ch$17 million, a significant
improvement from the net loss of Ch$7,061 million (US$10.1 million) reported in
2Q 2002, mainly as a consequence of the aforementioned improvements at both the
operating and non-operating levels.
REAL ESTATE/HOTEL ADMINISTRATION
The following table details Quinenco's proportional share of income from
investments in the Real Estate/Hotel Administration sector during 2002 and 2003:
-------------------------------------------------------------------------------------------------
REAL ESTATE/HOTEL ADMINISTRATION
-------------------------------------------------------------------------------------------------
Ownership 2Q 2002 YTD 2002 1Q 2003 2Q 2003 2Q 2003 YTD 2003
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$
-------------------------------------------------------------------------------------------------
Hoteles Carrera 89.9% (454) (755) (73) (355) (0.5) (428)
Habitaria 50.0% 217 45 (212) (35) (0.1) (247)
-------------------------------------------------------------------------------------------------
HOTELES CARRERA
-----------------------------------------------------------------------------------------------------------
Hoteles Carrera Quarter Accumulated for Year
-----------------------------------------------------------------------------------------------------------
2Q 2002 2Q 2003 2Q 2003 YTD 2002 YTD 2003 YTD 2003
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
-----------------------------------------------------------------------------------------------------------
Sales 1,711 1,411 2.0 3,516 3,079 4.4
Operating income (loss) (211) (282) (0.4) (408) (282) (0.4)
Net Income (loss) (505) (395) (0.6) (840) (475) (0.7)
-----------------------------------------------------------------------------------------------------------
Total assets 23,908 22,815 32.6
Shareholders' equity 14,846 14,205 20.3
-----------------------------------------------------------------------------------------------------------
2Q 2003 Results
Hoteles Carrera reported sales revenues of Ch$1,411 million (US$2.0 million) in
the second quarter of 2003, a decrease of 17.5% compared for the second quarter
of 2002. The decrease in second quarter revenues was primarily attributable to
lower occupancy rates and tariffs corresponding to the Santiago flagship hotel,
and to a lesser extent, the La Serena hotel in the north of Chile.
Hoteles Carrera reported an operating loss of Ch$282 million (US$0.4 million).
This carried through to the bottom line, although a reduction in interest
expense and other non-operating expenses reduced the net loss for the period by
Ch$110 million (US$0.2 million) to Ch$395 million (US$0.6 million).
Page 15 of 16
================================================================================
QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
================================================================================
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Second quarter 2003
================================================================================
HABITARIA
-----------------------------------------------------------------------------------------------------------
Habitaria Quarter Accumulated for Year
-----------------------------------------------------------------------------------------------------------
2Q 2002 2Q 2003 2Q 2003 YTD 2002 YTD 2003 YTD 2003
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
-----------------------------------------------------------------------------------------------------------
Sales 6,840 4,298 6.1 9,515 6,646 9.5
Operating income (loss) 542 108 0.2 396 (227) (0.3)
Net Income (loss) 433 (70) (0.1) 89 (494) (0.7)
-----------------------------------------------------------------------------------------------------------
Total assets 49,634 42,568 60.9
Shareholders' equity 16,778 17,089 24.4
-----------------------------------------------------------------------------------------------------------
2Q 2003 Results
Habitaria reported consolidated sales of Ch$4,298 million (US$6.1 million) in
the second quarter of 2003, a decrease of 37.2% from the Ch$6,840 million
(US$9.8 million) reported in 2Q 2002. During the second quarter, Habitaria sold
76 housing units compared to 141 units sold in the same period of 2002. It
reported a net loss of Ch$70 million (US$0.1 million) for the quarter. In spite
of an improvement in the real estate market in the Santiago metropolitan area in
comparison with the same quarter in 2002, Habitaria did not make new housing
stock available for sale during the period, thereby reducing its quarterly
sales.
Since Habitaria recognizes income (and its corresponding cost) related to the
sale of its housing units in the final phase of the sales process, revenues do
not fully reflect units sold under agreement for future delivery during the
period. Administration and overhead expenses are recognized when incurred.
Therefore, financial results may reflect a mis-matching of revenues and
expenses.
As June 30, 2003, an additional 117 apartments are under sales agreements, to be
delivered in future periods (not included in 2Q 2003 revenue). Habitaria's
inventory of finished stock as of June 30, 2003 (excluding pre-sold units as of
the same date) was 265 apartments and homes. During 2003, Habitaria is expected
to finish constructing three additional phases of ongoing projects.
#
All of Quinenco's Earnings and Press Releases and other relevant information on
the Company, including quarterly financial statements, are available for viewing
on the Company's website:
www. quinenco.cl
www. quinencogroup.com
Page 16 of 16
================================================================================
QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
================================================================================
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
QUINENCO S.A.
By: /s/ Luis Fernando Antunez
----------------------------------------
Name: Luis Fernando Antunez
Title: Authorized Representative
Dated: August 28, 2003