UNITED STATES OF AMERICA
SECURITITES AND EXCHANGE COMISION
Washington D.D. 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 March 2004
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 26 March 2004 announcing the Company's 2003 Consolidated
Fourth Quarter and Year End Results
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: March 26, 2004
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QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Fourth quarter 2003
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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 2003 CONSOLIDATED
FOURTH QUARTER AND YEAR END RESULTS
(Santiago, Chile, March 26, 2003) Quinenco S.A. (NYSE:LQ), a leading Chilean
business conglomerate, announced today its consolidated financial results in
Chilean GAAP, for the fourth quarter and year ended December 31, 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 (1.0% year-over-year). Figures in US$ have been
converted from Chilean pesos (Ch$) at the observed exchange rate on December 31,
2003 (Ch$593.80 = US$1.00) and are only provided for the reader's convenience.
2003 HIGHLIGHTS
o Quinenco reported net income of Ch$37,695 million (US$63.5 million) for
the twelve months ended December 31, 2003, an improvement of Ch$113,930
million (US$191.9 million over 2002's net loss of Ch$76,235 million
(US$128.4 million). In 4Q 2003, Quinenco reported a net loss of Ch$2,665
million (US$4.5 million), down sharply from the net loss of Ch$39,852
million (US$67.1 million) reported in 4Q 2002.
o 2003 operating profit jumped by 22.8% to Ch$12,747 million (US$21.5
million), mainly in connection with an improvement in Madeco's results
from operations in 2003. This tendency was also reflected in the fourth
quarter of 2003 with operating profit of Ch$1,653 million (US$2.8
million), mostly due to higher operating profit at Madeco and Lucchetti.
o Quinenco reported non-operating income of Ch$177 million (US$0.3 million)
in 2003, totally reverting 2002's non-operating loss of Ch$109,393 million
(US$184.2 million). The improvement was, in large part, due to a
significant increase in earnings related to Quinenco's interest in Banco
de Chile and CCU. In addition, non-operating results benefited from a
lower level of interest expense and other non-operating expenses as well
as a turnaround in results from foreign currency exchange rate
differences. A non-operating loss of Ch$8,659 million (US$14.6 million)
was reported in the fourth quarter of 2003, down by 80.8% from the
Ch$45,172 million (US$76.1 million) reported in the same quarter of 2002.
o Earnings per ADR amounted to US$0.59 for the twelve-month period ended
December 31, 2003.
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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
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[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Fourth quarter 2003
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GROUP HIGHLIGHTS - FOURTH QUARTER 2003 AND SUBSEQUENT EVENTS
Quinenco Distributed Interim Dividend
On January 9, 2004, Quinenco paid an interim dividend of Ch$11.24745 per share
(Ch$112.4745 per ADR). The interim dividend, which was charged against 2003 net
earnings and was equivalent to 30% of net earnings as of September 30, 2003,
amounted to Ch$12,144,322,552.
CCU/Lucchetti Joint Venture in Calaf
On January 12, 2004, CCU's subsidiary, ECUSA, and Empresas Lucchetti completed
the acquisition of Calaf S.A., a local cookie and candy manufacturer. Calaf's
products will be distributed through ECUSA's extensive soft drinks and beverages
distribution network of more than 90,000 clients. Lucchetti and ECUSA each hold
50% of the acquired company.
Empresas Lucchetti Announces Sale of Its Chilean Operations
On December 22, 2003, Empresas Lucchetti announced that it had signed a
Memorandum of Understanding (MOU) to sell its Chilean pasta, edible oil and soup
operations to Corpora Tresmontes, a local food products company for a gross
price of Ch$60 billion. The sale, which is expected to be concluded by the end
of March 2004, is subject to satisfactory due diligence as well as Corpora
Tremontes' ability to procure financing for the deal. The sale, which represents
approximately 85% of Empresas Lucchetti's consolidated assets, was approved by
shareholders on January 12, 2004. The MOU only contemplates the sale of
Lucchetti's Chilean operations and does not include Lucchetti Peru or its rights
in arbitration proceedings with the Peruvian government, currently underway in
Washington.
Capital Increase in Empresas Lucchetti
On October 16, 2003, pursuant to an extraordinary shareholders' meeting,
shareholders approved a capital increase for Ch$32,875 million. The capital
increase, which was carried out during December and January on the Santiago
Stock Exchange, amounted to Ch$15,726 million, divided among 1,048 million
shares. Quinenco's wholly-owned subsidiary, Inversiones Rio Bravo Ltda.
subscribed to 1,040 million shares for Ch$15,600 million and as a result,
Quinenco increased its interest in Lucchetti from 93.7 %to 95.9%. Proceeds from
the capital increase were used to reduce company indebtedness and finance
Lucchetti's acquisition of 50% of Calaf, a local cookie and candy manufacturer.
Sale of Santiago Hotel Carrera
On November 20, 2003, Hoteles Carrera sold its flagship hotel in Santiago to the
Chilean Ministry of Foreign Relations for UF832,000 (approximately US$23.7
million). The sale, pursuant to an agreement signed on August 27, 2003, included
the building and grounds of the Santiago hotel located in the El Centro section
of the city.
Madeco Loses Arbitration Against Joint Venture Partner Corning
Arbitration proceedings against Madeco's joint venture partner in Optel
Limitada, Corning Inc., concluded disfavorably for Madeco on November 11, 2003
when it was ruled that the optic fiber manufacturing joint venture would be
liquidated.
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QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Fourth quarter 2003
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Net Income Contribution
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Quinenco's
ownership % 4Q 2002 3Q 2003 4Q 2003 4Q 2003 YTD 2002 YTD 2003 YTD 2003
Sector/Company at 12/31/2003 MCh$ MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
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Financial Services:
Banco de Chile (1) 52.2% 2,353 10,586 8,117 13.7 15,578 38,047 64.1
Food & Beverage:
CCU (1) 30.8% 3,518 1,274 5,581 9.4 6,862 16,657 28.1
Lucchetti (1) 95.9% (31,422) 91 (1,310) (2.2) (35.224) (2,031) (3.4)
Telecommunications:
Telsur (1) 73.6% 1,277 1,409 1,616 2.7 4,478 5,468 9.2
Entel (2) 5.7% 1,056 808 893 1.5 2,361 3,414 5.7
Manufacturing:
Madeco (1) 55.2% (2,307) (248) (6,196) (10.4) (22,542) (10,717) (18.0)
Real estate/hotel admin.:
Carrera (1) 90.0% 128 (3,400) (954) (1.6) (871) (4,781) (8.1)
Habitaria (1) 50.0% 258 136 (226) (0.4) 453 (336) (0.6)
Total operating companies (25,139) 10,656 7,521 12.7 (28,905) 45,721 77.0
Quinenco & holding companies (14,714) (10,579) (10,186) (17.2) (47,330) (8,026) (13.5)
Total (39,852) 77 (2,665) (4.5) (76,235) 37,695 63.5
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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 - Full Year 2003
Quinenco reported net profit of Ch$37,695 million (US$63.5 million)
in 2003, totally reverting the 2002 net loss of Ch$76,235 million
(US$128.4 million). The increase in net profit was attributable to a
significant improvement in operating company results, which with the
exception of the real estate/hotel sector, showed dramatic across
the board increases for the year. In addition, at the corporate
level, Quinenco and holding company contribution also showed
improvement having reduced its loss contribution from Ch$47,330
million (US$79.7 million) in 2002 to Ch$8,026 million (US$13.5
million) in 2003.
Earnings per ordinary share amounted to Ch$34.91 and Ch$349.11
(US$0.59) per ADR in 2003.
Net Income - 4Q 2003
Quinenco reported a net loss for the fourth quarter of 2003 of
Ch$2,665 million (US$4.5 million), compared to a net loss of
Ch$39,852 million (US$67.1 million) in the fourth quarter of 2002.
The improvement in the quarterly net results was primarily
attributable to Lucchetti, which in the fourth quarter of 2002 made
a provision for 100% of the book value of its investment in
Lucchetti Peru, negatively impacting results in that year. In
addition, the contribution from Banco de Chile, CCU and Telefonica
del Sur increased by 114% compared to the same quarter of 2002,
although a net loss contribution from Madeco, and Carrera partially
offset the increase.
The loss per ordinary share amounted to Ch$2.47 and the loss per
ADR, Ch$24.68 (US$0.04) in the fourth quarter of 2003.
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QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Fourth quarter 2003
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Consolidated Income Statement Breakdown
--------------------------------------------------------------------------------------------------------------------------------
4Q 2002 3Q 2003 4Q 2003 4Q 2003 YTD 2002 YTD 2003 YTD 2003
MCh$ MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
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Revenues
Madeco 54,888 59,804 53,712 90.5 258,845 237,666 400.2
Lucchetti 18,025 15,300 13,600 22.9 84,636 59,115 99.6
Telsur 12,935 12,873 13,114 22.1 49,270 51,469 86.7
Carrera 2,100 1,479 2,119 3.6 7,086 6,671 11.2
Quinenco & holding (1,417) 642 785 1.2 425 2,458 4.2
Total 86,531 90,098 83,330 140.3 400,262 357,379 601.9
Operating income (loss)
Madeco (961) 1,730 176 0.3 4,043 7,457 12.6
Lucchetti (480) 798 807 1.4 2,705 2,894 4.9
Telsur 3,498 3,076 3,189 5.4 13,230 12,317 20.7
Carrera 258 (216) 286 0.5 (382) (211) (0.4)
Quinenco & holding (2,426) (2,619) (2,805) (4.8) (9,216) (9,710) (16.3)
Total (111) 2,769 1,653 2.8 10,380 12,747 21.5
Non-operating income (loss)
Interest income (199) 728 603 1.0 5,401 2,928 4.9
Share of net income/loss
from related companies:
Banco de Chile 2,353 10,586 8,117 13.7 15,578 38,047 64.1
CCU 3,518 1.274 5,581 9.4 6,862 16,657 28.1
Habitaria 258 136 (226) (0.4) 453 (336) (0.6)
Entel 1,056 808 893 1.5 2,361 3,414 5.7
Other equity inv 189 69 58 0.1 180 (385) (0.6)
Other non-op income 1,079 641 478 0.8 6,037 38,009 64.0
Amort. of GW expense (4,974) (5,043) (4,763) (8.0) (20,737) (20,095) (33.8)
Interest expense (10,035) (9,707) (6,113) (10.3) (51,234) (35,192) (59.3)
Other non-op expenses (50,616) (20,218) (13,502) (22.7) (65,309) (45,746) (77.0)
Price-level/fx. translation
gains/losses 12,199 2,844 215 0.3 (8,985) 2,876 4.8
Total (45,172) (17,882) (8,659) (14.6) (109,393) 177 0.3
Income Tax 1,039 (964) (4) (0.0) 143 (2,569) (4.3)
Extraordinary items -- -- -- -- -- -- --
Minority Interest 3,161 122 3,790 6.4 20,727 3,816 6.4
Amort. of neg. GW 1,231 16,032 555 0.9 1,908 23,524 39.6
Net income (loss) (39,852) 77 (2,665) (4.5) (76,235) 37,695 63.5
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Revenues - Full Year 2003
Consolidated revenues in 2003 totaled Ch$357,379 million (US$601.9
million), a decrease of 10.7% from the Ch$400,262 million (US$674.1
million) reported in 2002. The reduction in sales in 2003 was
primarily attributable to Lucchetti's and Madeco's operations.
Lucchetti reported a decline in sales of 30.2% mainly due to the
discontinuation of its productive activities in Peru in January
2003. Madeco's sales, which fell by 8.2% to Ch$237,666 million
(US$400.2 million), were affected by weak demand for cables,
particularly in Brazil.
Consolidated sales in 2003 can be broken down as follows: Madeco
(66.5%), Lucchetti (16.5%), Telsur (14.4%), Hoteles Carrera (1.9%)
and Quinenco and intermediate holding companies (0.7%).
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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
--------------------------------------------------------------------------------
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QUINENCO S.A.
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www.quinencogroup.cl Fourth quarter 2003
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Revenues - 4Q 2003
Consolidated revenues for the fourth quarter of 2003 were Ch$83,330
million (US$140.3 million), 3.7% lower than the Ch$86,531 million
(US$145.7 million) registered in the fourth quarter of 2002, mainly
due to a decrease of 24.5% in Lucchetti's sales level following the
shutdown of its Peruvian pasta operations in January 2003 and a 2.1%
decrease in Madeco's sales. The decline in Madeco's sales was
primarily attributable to a reduction in sales of the wire and cable
unit, the effect of which was partially offset by an increase in
sales of Madeco's other three business units.
Consolidated sales can be broken down as follows: Madeco (64.5%),
Lucchetti (16.3%), Telsur (15.7%), Carrera (2.5%) and others (1.0%).
Operating Income - Full year 2003
Consolidated operating income was Ch$12,747 million (US$21.5
million) in 2003, up by 22.8% from the Ch$10,380 million (US$17.5
million) reported in 2002. The sharp increase in operating profit
for the year was primarily related to Madeco's operations, which
benefited from SG&A expense cutbacks in all of its business units.
The increase in consolidated operating profit was partially offset
by a decline in Telsur's operating results which fell by 6.9% to
Ch$12,317 million (US$20.7 million) as the operating margin
associated with the newly consolidated non-regulated business
segments (internet, security and business services) does not yet
fully compensate for the reduction in operating profit associated
with Telsur's traditional telephony services.
Operating Income - 4Q 2003
Operating income for the fourth quarter of 2003 was Ch$1,653 million
(US$2.8 million), compared to an operating loss of Ch$111 million
(US$0.2 million) reported in the fourth quarter of 2002. The
improvement in quarterly operating performance was mainly due to a
significant rise in operating profits at Lucchetti and Madeco.
Lucchetti reverted the operating loss it reported in 4Q 2003 as a
result of the discontinuation of its Peruvian pasta operations which
generated operating losses in 4Q 2002. The improvement in Madeco's
operating performance in the fourth quarter was primarily due to a
reduction in SG&A expenses, implemented as part of a company-wide
plan to improve profitability levels.
EBITDA - Full year 2003
EBITDA amounted to Ch$41,519 million (US$69.9 million) in 2003,
compared to Ch$40,709 million (US$68.6 million) in 2002, an increase
of 2.0%.
EBITDA - 4Q 2003
EBITDA reached Ch$8,106 million (US$13.7 million) in 4Q 2003,
compared to Ch$7,313 million (US$12.3 million) in 4Q 2002, an
increase of 10.8%.
Non-Operating Results - Full year 2003
Non-operating income amounted to Ch$177 million (US$0.3 million) in
2003, compared to non-operating losses of Ch$109,393 million
(US$184.2 million) in 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, which includes results from Banco de Chile and CCU,
reached Ch$57,396 million (US$96.7 million), compared to Ch$25,435
million (US$42.8 million) in 2002. The significant increase mostly
corresponds to Quinenco's proportionate share of income from Banco
de Chile, which reported record profits in its first post-merger
year (from Ch$15,578 million (US$26.2 million) in 2002 to Ch$38,047
million (US$64.1 million) in 2003) as a result of lower operating
expenses and loss provisions as well as
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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
--------------------------------------------------------------------------------
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QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Fourth quarter 2003
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strong growth in fee income. Similarly, Quinenco's share of CCU's
net income went from Ch$6,862 million (US$11. 6 million) to
Ch$16,657 million (US$28.1 million) as a result of CCU having
benefited from a 20.2% increase in operating profits and an
extraordinary gain on sale derived from the divestment of its
Croatian brewery.
o Other non-operating income
Other non-operating income amounted to Ch$38,009 million (US$64.0
million), a marked increase from the Ch$6,037 million (US$10.2
million) reported in 2002. The variation is primarily explained by
the settlement payment of Ch$36,035 million (US$60.7 million)
received by Quinenco from its ex-partner in IRSA, the holding
company which controls 61.6% of CCU.
o Amortization of goodwill expense (net)
Amortization of goodwill expense (net) amounted to Ch$20,095 million
(US$33.8 million) in 2003, varying slightly from the Ch$20,737
million (US$34.9 million) reported in 2002. Goodwill expense is
mostly related to the Banco de Chile acquisition in March 2001.
Goodwill (net) corresponding to Banco de Chile amounted to
Ch$296,936 million (US$500.1 million) as of December 31, 2003 (this
includes goodwill of Ch$68,423 million (US$115.2 million) associated
with the ex-Banco Edwards acquisition in 1999). Goodwill is
amortized over a twenty-year period, using the straight-line method.
o Interest expense
Interest expense in 2003 amounted to Ch$35,192 million (US$59.3
million), a 31.3% decrease compared to the Ch$51,234 million
(US$86.3 million) reported in 2002. The decrease is mainly explained
by a reduction in the debt levels of the operating companies and at
the corporate level, and to a lesser extent, lower prevailing
interest rates during the twelve-month period.
o Other non-operating expenses
Other non-operating expenses amounted to Ch$45,746 million (US$77.0
million), compared to Ch$65,309 million (US$110.0 million) in 2002.
In 2002, Lucchetti wrote-off the book value of its investment in its
Peruvian pasta plant, negatively impacting results in that year by
Ch$30,110 million (US$50.7 million). The variation in other
non-operating expenses is mostly explained the absence of this
provision in 2003, however Madeco also reported a lower level of
write-offs and provisions in connection with its foreign operations
compared to 2002 which further reduced other non-operating expenses.
The reduction in other non-operating expenses was partially offset
by a loss of Ch$21,130 million (US$35.6 million) related to Madeco's
capital increase to which Quinenco did not subscribe additional
shares. Worth mentioning is that the effect of this loss is entirely
offset by a credit to negative goodwill for the same amount.
o Price-level restatement and foreign currency translation losses
Price-level restatement and foreign currency translations gains
amounted to Ch$2,876 million (US$4.8 million) in 2003, compared to
losses of Ch$8,985 million (US$15.1 million) in 2002.
In 2003, the gains specific to foreign currency translation amounted
to Ch$984 million (US$1.7 million), compared to losses of Ch$14,058
million (US$23.7 million). 2002 losses mostly corresponded to
Madeco's operations as a result of the devaluation of the Chilean
peso, Argentine peso and Brazilian real during that year. In 2003,
the gains on foreign currency translation mainly relate to the
appreciation of the Chilean peso via-a-vis the US dollar. The
price-level restatement gain amounted to Ch$1,892 million (US$3.2
million), down from the Ch$5,073 million (US$8.5 million) reported
in 2002 owing to the lower inflation level of 1% in 2003.
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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 Fourth quarter 2003
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Non-Operating Results - 4Q 2003
Quinenco reported a non-operating loss of Ch$8,659 million (US$14.6
million) in the fourth quarter of 2003, compared to a non-operating
loss of Ch$45,172 million (US$76.1 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) increased by 95.6% to Ch$14,423 million (US$24.3
million) in 2003. The increase mainly corresponded to increases in
the proportionate share of net income from Banco de Chile, and to a
lesser extent, CCU. Banco de Chile's net profit increased by 211.8%
to Ch$27,542 million (US$46.4 million)in 4Q 2003, of which
Quinenco's share was Ch$8,117 million (US$13.7 million). CCU's net
profit for the fourth quarter of 2003 also showed a significant
improvement over 4Q 2002, reaching Ch$18,117 million (US$30.5
million) of which Ch$5,581 million (US$9.4 million) corresponded to
Quinenco's interest.
o Amortization of goodwill expense
Amortization of goodwill expense amounted to Ch$4,763 million
(US$8.0 million) in the fourth quarter of 2003, down by 4.2% from
the Ch$4,974 million (US$8.4 million) reported in the same period of
2002. Goodwill expense at the consolidated level is almost entirely
related to the Banco de Chile acquisition in 2001, and to a lesser
extent, the ex-Banco Edwards acquisition in 1999 (now kept on the
books as Bank of Chile).
o Interest Expense
Interest expense for the fourth quarter of 2003 amounted to Ch$6,113
million (US$10.3 million), a decrease of 39.1% compared to the same
period in 2002. The decrease is primarily associated with a lighter
consolidated debt load. Madeco reported a reduction in interest
expense of 60.6% in 4Q 2003, accounting for Ch$2,290 million (US$3.9
million) of the total reduction. Interest expense related to the
corporate level also showed a sharp reduction, falling by 26%
quarter-over-quarter.
o Other non-operating expenses
Other non-operating expenses amounted to Ch$13,502 million (US$22.7
million), compared to Ch$50,616 million (US$85.2 million) reported
in the same quarter in 2002. During the fourth quarter of 2002,
Lucchetti made a provision of Ch$30,110 million (US$50.7 million) to
write-off 100% of the book value of its investment in Lucchetti Peru
following its forced closure by the Peruvian authorities. The
variation quarter-over-quarter is mostly explained by this
provision.
The main items comprising other non-operating expenses in 4Q 2003
were provisions related to Madeco's operations, including a
provision of Ch$4,917 million (US$8.3 million) to write-off Madeco's
optic fiber subsidiary in Brazil. In addition, Lucchetti made
additional provisions in connection with its Peruvian subsidiary
which has been in the process of liquidating its operations
following its forced closure in the beginning of 2003, including a
write-off of accounts receivable of Ch$1,187 million (US$2.0
million). Also included with other non-operating expenses in 4Q 2003
was an additional loss provision of Ch$1,231 million (US$2.1
million) made in connection with the disposal of the Santiago Hotel
Carrera to the Chilean Ministry of Foreign Relations.
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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
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QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Fourth quarter 2003
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o Price-level restatement and foreign currency translation gains
(losses) net
Price-level restatement and foreign currency translation gains (net)
were Ch$215 million (US$0.4 million) in the fourth quarter of 2003,
compared to gains of Ch$12,199 million (US$20.5 million) in the same
period in 2002.
Price-level restatement gains amounted to Ch$1,015 million (US$1.7
million) in 4Q 2003 compared to price-level restatement gains of
Ch$1,329 million (US$2.2 million) reported in the same quarter in
2002.
Foreign currency translation losses amounted to Ch$800 million
(US$1.3 million) in 4Q 2003, compared to foreign currency
translation gains of Ch$10,870 million (US$18.3 million) in the same
period in 2002. In both quarters, the results from foreign currency
translations mostly corresponded to Madeco's operations. The sharp
reduction in foreign currency translation results in 4Q 2003 was
primarily attributable to the effect of the revaluation of the
Chilean peso on US dollar net assets (the composition of net assets
having changed following Madeco's financial restructuring in which
US dollar debt was reduced considerably) as well as translation
losses from Madeco's foreign subsidiaries. In 4Q 2002, foreign
currency translation gains corresponding to Madeco's operations were
primarily due to the revaluation of the Chilean peso and the
Argentine peso during that period.
Income Taxes - Full Year 2003
Quinenco reported income taxes in 2003 amounting to Ch$2,569 million
(US$4.3 million), compared to income tax credits of Ch$143 million
(US$0.2 million) in 2002.
Income Taxes - 4Q 2003
Quinenco reported income taxes of Ch$4 million (US$0.0 million),
compared to an income credit of Ch$1,039 million (US$1.8 million)
during the same period of 2002.
Minority Interest - Full Year 2003
In 2003, Quinenco reported an add-back to income of Ch$3,816 million
(US$6.4 million). The amount is mainly related to minority
shareholders' proportionate share of Madeco's net loss reported in
2003, partially offset by minority shareholders' proportionate share
of Telefonica del Sur's net income.
Minority Interest - 4Q 2003
In the fourth quarter of 2003, Quinenco added back to income
Ch$3,790 million (US$6.4 million) related to minority shareholders'
interests for the period. The amount is mainly related to minority
shareholders' proportionate share of Madeco's net loss reported in
2003, partially offset by minority shareholders' proportionate share
of Telefonica del Sur's net income.
Amortization of Negative Goodwill - Full Year 2003
Amortization of negative goodwill amounted to Ch$23,524 million (US$39.6
million) in 2003 and was mostly comprised of an extraordinary credit of
Ch$21,130 million (US$36.5 million) related to Madeco's capital increases in
June and August 2003 to which Quinenco did not subscribe additional shares.
Worth mentioning is that this credit offset the loss item included in other
non-operating expenses for the same amount and the effect on income for the year
is zero.
Amortization of Negative Goodwill - 4Q 2003
Amortization of negative goodwill amounted to Ch$555 million (US$0.9
million) in the fourth quarter of 2003, compared to Ch$1,231 million (US$2.1
million) in the same period of 2002.
Page 8 of 21
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QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Fourth quarter 2003
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET ANALYSIS (vis-a-vis the 3rd quarter of 2003)
Condensed Consolidated Balance Sheet
----------------------------------------------------------------------------------------------------------
As of As of As of As of
12/31/02 9/30/03 12/31/03 12/31/03
MCh$ MCh$ MCh$ MUS$
----------------------------------------------------------------------------------------------------------
Current assets 261,177 287,611 249,057 419.4
Fixed assets 396,391 366,267 325,777 548.6
Other assets 880,902 818,271 816,526 1,375.1
Total assets 1,538,470 1,472,149 1,391,360 2,343.1
Current liabilities 306,860 207,021 161,911 272.7
Long-term liabilities 514,684 493,009 499,068 840.5
Minority interest 80,106 110,175 96,359 162.3
Shareholders' equity 636,820 661,944 634,022 1,067.7
Total liabilities & shareholders' equity 1,538,470 1,472,149 1,391,360 2,343.1
----------------------------------------------------------------------------------------------------------
Current Assets
Current assets decreased 13.4% compared to the third quarter of
2003, mainly attributable to Quinenco and Madeco. Current assets
corresponding to Quinenco's operations decreased due to bond
payments, other debt service and subscription to Lucchetti's capital
increase in December. The reduction in Madeco's current assets was
mainly due to debt service cancellation. These reductions were
partially offset by an increase in current assets at the corporate
level, mainly cash proceeds from the sale of the Hotel Carrera
building and grounds.
Fixed Assets and Other Assets
Fixed assets decreased 11.1% compared to the third quarter of 2003,
mostly due to the sale of the Hotel Carrera building and grounds as
well as adjustments to fixed assets made by Madeco to reflect the
write-down of Optel, assets in Argentina and Armat. Other assets did
not vary significantly compared to the third quarter of 2003.
Current Liabilities
Current liabilities decreased 21.8% compared to the third quarter of
2003, mostly reflecting debt pay down at the Quinenco corporate
level, and to a lesser extent, at Madeco.
Long-term Liabilities
Long-term liabilities did not vary significantly compared to the
third quarter of 2003.
Minority Interest
Minority interest decreased by 12.5% compared to the third quarter
of 2003, mainly attributable to the minority interest corresponding
to minority shareholders' interest in Madeco.
Shareholders' Equity
Shareholders' equity decreased by 4.2% compared to the third quarter
of 2003, mainly corresponding to Madeco. The decrease in Madeco's
shareholders' equity reflected the fourth quarter net loss as well
as the effect of exchange rate differences arising from the
appreciation of the Chilean peso vis-a-vis the US dollar under
Technical Bulletin 64 with respect to Madeco's foreign operations.
Quinenco Corporate Level
As of December 31, 2003, financial debt at the corporate level was
Ch$330,157 million (US$556.0 million). As of the same date, cash and
cash equivalents amounted to approximately Ch$35,094 million
(US$59.1 million). The debt to total capitalization ratio at the
corporate level was 34.2%.
Page 9 of 21
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QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Fourth quarter 2003
--------------------------------------------------------------------------------
RETURN ON CAPITAL EMPLOYED (ROCE)
With the aim of focusing on creating value for Quinenco's shareholders as well
as an indicative measurement of operating company results, the following table
indicates the return on capital employed (ROCE) at each of Quinenco's main
operating companies (excluding Banco de Chile):
----------------------------------------------------------------------------
ROCE (1)
For the 12 months ended 9/30/03
----------------------------------------------------------------------------
Madeco 1.6%
Telsur 8.3%
Lucchetti 4.9%
Carrera (1.3%)
CCU 9.1%
Habitaria 0.2%
----------------------------------------------------------------------------
(1) Adjusted operating return over capital employed for the last 12 months.
Page 10 of 21
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QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
SECTOR /OPERATING COMPANY ANALYSIS
FINANCIAL SERVICES SECTOR
The following table details Quinenco's proportional share of income from
investments in the Financial Services sector during 2002 and 2003:
FINANCIAL SERVICES
---------------------------------------------------------------------------------------------------
Ownership 4Q 2002 2002 4Q 2003 4Q 2003 2003 2003
% MCh$ MCh$ MCh$ MUS$ MCh$ MUS$
---------------------------------------------------------------------------------------------------
Banco de Chile (1) 52.2% 2,353 15,578 8,117 13.7 38,047 64.1
---------------------------------------------------------------------------------------------------
1) Ownership % corresponds to voting rights. Quinenco's proportionate share of
Banco de Chile's income (economic rights) is 29.2%.
BANCO DE CHILE
Banco de Chile Quarter Accumulated for Year
----------------------------------------------------------------------------------------------------------
4Q 2002 4Q 2003 4Q 2003 2002 2003 2003
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
----------------------------------------------------------------------------------------------------------
Operating revenues 116,483 105,026 176.9 419,821 424,250 714.5
Provisions (28,525) (16,772) (28.2) (119,045) (60,069) (101.2)
Operating expenses (73,995) (59,660) (100.5) (250,517) (224,436) (378.0)
Net Income (loss) 8,834 27,542 46.4 53,161 130,553 219.9
Loan portfolio 6,167,763 6,242,123 10,512.2
Total assets 8,679,770 9,249,902 15,577.5
Shareholders' equity 624,412 695,676 1,171.6
Net interest margin 3.6% 1.0% 4.5% 2.7%
Net Financial Margin 4.5% 3.8% 4.1% 3.8%
Efficiency ratio 63.5% 56.8% 59.7% 52.9%
ROAE 5.9% 16.0% 8.9% 20.0%
ROAA 0.4% 1.2% 0.6% 1.4%
----------------------------------------------------------------------------------------------------------
Full year 2003 Results
Banco de Chile reported net income of Ch$130,553 million (US$219.9 million), for
the year ended December 31, 2003, the highest level in its history. This
represented an increase of 146% from the net income of Ch$53,161 million
(US$89.5 million) reported in 2002. The significant increase in net profit in
2003 was mainly attributable to lower provisions for loan losses, strong growth
in fee income, higher loan recoveries and a sharp reduction in operating
expenses, the effects of which more than offset a decline in the bank's net
financial income and higher income taxes incurred during the period.
Operating revenue amounted to Ch$424,250 million (US$714.5 million), up 1.1%
from the Ch$419,821 million (US$707.0 million) reported in 2002. Fee income,
which accounted for 24.4% of operating revenues in 2003, was the main driver as
both the banking and stock brokerage businesses experienced important fee income
growth. As a result, fee income jumped by 30.2% to Ch$103,389 (US$174.1 million)
in 2003. To a lesser extent, gains on financial instruments also contributed to
the increase in operating revenues, climbing from Ch$1,130 million (US$1.9
million) to Ch$5,330 million (US$9.0 million), mainly attributable to earnings
related to the sale of Argentine securities. These increases more than offset
the decline in net financial income which fell by 7% to Ch$315,531 million
(US$531.4 million), mostly as a consequence of the lower inflation rate of 1%
which affected the amount of interest income earned on UF based assets as well
as the absence of repricing benefits.
Page 11 of 21
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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 Fourth quarter 2003
--------------------------------------------------------------------------------
Banco de Chile's efficiency ratio (measured as operating expenses to operating
revenues), which rose temporarily in 2002 to 59.7% when the bank was undergoing
its merger, dropped to 52.9% for the twelve month period.
Provisions for loan losses were cut by more than 40% to Ch$60,069 million
(US$101.2 million) in tune with more positive economic indicators and
performance in Chile, most notably GDP growth, employment levels, low interest
rates and inflation levels. To a lesser extent, the 17% appreciation of the
Chilean peso also contributed to lower provisions on foreign currency
denominated loans.
As of December 2003, the Bank's loan portfolio varied slightly from the same
period in 2002, having shown an increase of 1.2% over the last twelve months.
The bank experienced growth in almost all of its loan segments, most notably the
consumer loan and foreign trade loan areas.
Banco de Chile was the second ranked bank in the country (in terms of loans)
with a market share of 18.1% according to information published by the Chilean
Superintendency of Banks for the period ended December 31, 2003. Its return on
capital and reserves for the twelve-month period was 23.1%, compared to 8.9% in
2002 when the bank was nearing completion of its merger process. The local
financial system as a whole reported a return on capital and reserves of 16.6%
in 2003, according to the same source, well below that of Banco de Chile.
4Q 2003 Results
Banco de Chile reported net income of Ch$27,542 million (US$46.4 million) in the
fourth quarter of 2003, an increase of nearly 212% from the Ch$8,834 million
(US$14.9 million) reported in the same period of 2002. The increase in net
quarterly earnings was attributable to a sharp reduction in operating expenses
and provisions for loan losses as well as an increase in fee income compared to
the fourth quarter of 2002.
Operating revenues decreased by 9.8% to Ch$105,026 million (US$176.9 million) in
the fourth quarter of 2003 as a result of a stiff 13.4% decline in net financial
income, which went from Ch$91,100 million (US$153.4 million) to Ch$78,864
million (US$132.8 million) and losses on financial instruments which reached
Ch$3,836 million (US$6.5 million). The decline in net financial income was
attributable to the negative inflation of 0.2% experienced during the fourth
quarter of the year. Losses on financial instruments corresponded to marked to
market losses related to local and international long-term interest rate hikes
as well as the sale of an Argentine bank loan. The reduction in operating
revenues was partially offset by a 41.7% increase in fee income (Ch$29,998
million, US$50.5 million) associated with banking services and to a lesser
extent, stock brokerage services. Fee income as a percentage of operating
revenues was 28.6% compared to 18.2% in 4Q 2002, continuing the growth trend
experienced throughout the year.
Provisions for loan losses, which amounted to Ch$16,772 million (US$28.2
million), dropped significantly from the Ch$28,883 million (US$48.6 million)
reported in the fourth quarter of 2002, in line with the dynamism of the economy
and more positive outlook. Operating expenses fell by 19.4% to Ch$59,660 million
(US$100.5 million) compared to the fourth quarter of 2002 when operating
expenses included costs relative to the merger process.
FOOD & BEVERAGE SECTOR
The following table details Quinenco's proportional share of income (loss) from
investments in the Food & Beverage sector during 2002 and 2003:
Page 12 of 21
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QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Fourth quarter 2003
--------------------------------------------------------------------------------
FOOD & BEVERAGE
-----------------------------------------------------------------------------------------------------
Ownership 4Q 2002 2002 4Q 2003 4Q 2003 2003 2003
% MCh$ MCh$ MCh$ MUS$ MCh$ MUS$
-----------------------------------------------------------------------------------------------------
CCU 30.8% 3,518 6,862 5,581 9.4 16,657 28.1
Lucchetti 95.9% (31,422) (35,224) (1,310) (2.2) (2,031) (3.4)
-----------------------------------------------------------------------------------------------------
CCU
------------------------------------------------------------------------------------------------------------
CCU Quarter Accumulated for Year
------------------------------------------------------------------------------------------------------------
4Q 2002 4Q 2003 4Q 2003 2002 2003 2003
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
------------------------------------------------------------------------------------------------------------
Sales 103,982 118,006 198.7 349,350 384,064 646.8
Operating income (loss) 14,651 21,946 37.0 38,142 45,863 77.2
Net Income (loss) 11,426 18,117 30.5 22,286 54,088 91.1
Total Assets 658,647 576,598 971.0
Shareholders' equity 437,820 278,772 469.5
------------------------------------------------------------------------------------------------------------
Full Year 2003 Results
CCU's consolidated sales revenues rose by 9.9% to Ch$384,064 million (US$646.8
million), mainly attributable to a 9.0% increase in volume sold. With the
exception of domestic wines, all of CCU's beverage segments experienced volume
increases in 2003, most notably beer in Chile and Argentina. In general terms,
volumes were influenced by the economic reactivation underway in Chile and to a
certain extent, in Argentina, as well as the addition of new products to CCU's
portfolio, particularly Heineken. In addition, Finca La Celia began
consolidating its export wine operation with VSP in January of 2003 and CCU
entered the pisco segment in 2003, both of which also served to increase sales
volumes for the year. Higher average beer prices in Chile and Argentina more
than compensated for the sharp drop in average wine prices during the year.
Revenues by core businesses can be broken down as follows: beer Chile (39.0%),
beer Argentina (8.2%), soft drinks/mineral water (30.0%), wine (21.5%) and
others (1.3%) (worth noting is that pisco revenues are included with others).
Operating income jumped by 20.2% to Ch$45,863 million (US$77.2 million) in 2003,
mainly due to strong growth in revenues in the beer segment in Chile both in
terms of volume and average prices as well as lower cost of goods sold and SG&A
expenses as a percentage of sales, the combination of which resulted in an
increase in the Chilean beer segment's operating profit of 34.8% during the
year. Additionally, the beer segment in Argentina improved considerably compared
to 2002, reducing its operating loss by 67.2% to Ch$3,665 million (-US$6.2
million) in response to a somewhat improved economic scenario. These increases
were partially offset by a sharp decline in the operating profit associated with
the wine segment which fell from Ch$9,163 million (US$15.4 million) to Ch$3,801
million (US$6.4 million) as a consequence of significant reductions in export
wine prices as well as a deterioration in the operating profit associated with
soft drinks/mineral water segment, which suffered from higher COGS. As a
percentage of sales, CCU's operating margin improved to 11.9%, up from 10.9% in
2002.
CCU reported non-operating income of Ch$13,601 million (US$22.9 million),
compared to a non-operating loss of Ch$7,131 million (US$12.0 million) in 2002.
The variation in non-operating results can mainly be explained by an
extraordinary gain of Ch$20,321 million (US$34.2 million) on the sale of CCU's
investment in Karlovacka in 2003.
Net profit for the year amounted to Ch$54,088 million (US$91.1 million), an
increase of 142.7% over 2002, as a result of the aforementioned improvements in
both operating and non-operating results.
4Q 2003 Results
CCU's fourth quarter consolidated sales grew by 13.5% compared to the fourth
quarter of 2002 due to an increase of 9.1% in consolidated sales volumes and
4.0% higher average prices. The growth in sales volume was led by the beer
segments, both in Chile and Argentina (7.2% and 9.7% respectively), soft drinks
(7.9%)
Page 13 of 21
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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 Fourth quarter 2003
--------------------------------------------------------------------------------
and export wines (20.8%), partially offset by a decline in domestic wine volumes
of 1.1%. The increase in consolidated average prices of 4.0% was the result of
higher beer prices in Chile and Argentina (9.9% and 24.4%, respectively), and to
a lesser extent, 0.2% higher prices in soft drinks and domestic wines (8.1%),
partially offset by 22.2% lower export wines prices. Export wine prices dropped
as a result of the stronger Chilean peso as well as exports from VSP's
subsidiary, Finca La Celia of low-priced bulk wine.
Operating income rose by 49.8% in the fourth quarter to Ch$21,946 million
(US$37.0 million), mainly as a result of the higher sales level and lower cost
of goods sold as a percentage of sales associated with the beer and soft drinks
segments, which translated directly into an increase of 21.4% in CCU's gross
profit for the period. This coupled with a decrease in SG&A expenses as a
percentage of sales (from 38.1% in 4Q 2002 to 37.3% in 4Q 2003) served to
significantly increase operating profits for the quarter. The increase in gross
profit and reduction in SG&A as a percentage of total sales also led to an
improvement in the consolidated operating margin, which rose from 14.1% in 4Q
2002 to 18.6% in 4Q 2003.
Non-operating losses increased from Ch$1,393 million (US$2.3 million) in 4Q 2002
to Ch$3,207 million (US$5.4 million) in 4Q 2003. The increase in non-operating
losses in the fourth quarter of the year was mostly attributable to
non-operating losses associated with a change in accounting criteria for
inventory, fixed asset write-offs, higher interest expense associated with a
higher overall debt level and price-level restatement losses, the effects of
which were partially offset by foreign exchange translation gains.
CCU reported net income in 4Q 2003 of Ch$18,117 million (US$30.5 million), an
increase of 58.6% compared to the same period in 2002. The hike in quarterly
profits was primarily due to the aforementioned increase in operating income
reported during the period, lower income taxes and a credit to minority interest
for the portion of VSP's losses that correspond to minority shareholders. These
increases were partially offset by higher non-operating losses incurred in 4Q
2003.
LUCCHETTI
------------------------------------------------------------------------------------------------------------
Lucchetti Quarter Accumulated for Year
------------------------------------------------------------------------------------------------------------
4Q 2002 4Q 2003 4Q 2003 2002 2003 2003
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
------------------------------------------------------------------------------------------------------------
Sales 18,025 13,600 22.9 84,637 59,115 99.6
Operating income (loss) (480) 807 1.4 2,705 2,894 4.9
Net Income (loss) (33,538) (1,366) (2.3) (37,595) (2,136) (3.6)
Total Assets 77,108 79,457 133.8
Shareholders' equity 16,351 27,887 47.0
------------------------------------------------------------------------------------------------------------
Full Year 2003 Results
Lucchetti reported sales of Ch$59,115 million (US$99.6 million) for the year
2003, down by Ch$25,521 million (US$43.0 million) or 30.2% from 2002. The
reduction in sales is mainly due to the discontinuation of activities in Peru
following the forced closure of plant facilities in early 2003 (Ch$18,981
million, US$32.0
Page 14 of 21
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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.
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www.quinencogroup.cl Fourth quarter 2003
--------------------------------------------------------------------------------
million). Sales in Chile also experienced a downturn, falling from Ch$65,656
million (US$110.6 million) in 2002 to Ch$59,115 million (US$99.6 million) in
2003. Sales in Chile were affected by a sharp reduction in the volume of edible
oils sold (-43.4%) as the domestic market was flooded by Argentine imports.
Pasta and soup sales in Chile rose by 5.2% and 22.1% respectively, although this
did not compensate for the decline in edible oil sales.
Operating profit was Ch$2,894 million (US$4.9 million), up by 7% from the
Ch$2,705 million (US$4.6 million) reported in 2002. In 2002, the Peruvian
operation generated operating losses of Ch$903 million (US$1.5 million). The
absence of these losses in 2003 partly explain the positive variation in
operating results although a reduction in the operating profits attributable to
the Chilean operations of Ch$714 million (US$1.2 million) partially offset this
effect. Operating profits in the Chilean operations were affected by the
aforementioned drop in sales of edible oils.
Non-operating losses amounted to Ch$6,733 million (US$11.3 million), compared to
non-operating losses of Ch$40,119 million (US$67.6 million) in 2002. 2002
non-operating results included the write- off of 100% of the book value of
Lucchetti's investment in Peru (Ch$30,110 million, US$50.7 million) following
its forced closure, mainly explaining the variation between the two years. In
addition, interest expenses was reduced by 41.6% to Ch$2,889 million.
In spite of the improvement at the operating level in 2003 and a tax credit
amounting to Ch$1,703 million (US$2.9 million), Lucchetti reported a net loss of
Ch$2,136 million (US$3.6 million) for the year 2003.
4Q 2003 Results
Lucchetti reported sales of Ch$13,600 million (US$22.9 million) in the fourth
quarter of 2003, down Ch$4,425 million (US$7.5 million) or 24.5% compared to the
same period in 2002. Approximately 61% of the downturn in sales is accounted for
by the closure of the Peruvian operations in early January 2003. Reduced sales
in Chile also affected the sales level in the fourth quarter of the year as low
priced Argentine imports of edible oils continued to inundate the domestic
market.
In spite of the reduction in sales, operating profit increased by Ch$1,287
million (US$2.2 million) to Ch$807 million (US$1.4 million). The increase in
operating results was mainly due to a sharp reduction in SG&A expenses as well
as the absence of operating losses from the Peruvian operations.
Non-operating losses amounted to Ch$3,800 million (US$6.4 million), a
significant reduction from the Ch$32,795 million (US$55.2 million) reported in
4Q 2002 when Lucchetti wrote-off the book value of its Peruvian investment.
Non-operating losses were mostly composed of other non-operating expenses which
included legal expenses related to the Lucchetti's arbitration currently
underway in Washington and extraordinary severance expenses.
Lucchetti reported a net loss of Ch$1,366 million (US$2.3 million) in 4Q 2003
compared to a net loss of Ch$33,538 million (US$56.5 million) in the same period
of 2002. The improvement in Lucchetti's quarterly net results was attributable
to the sharp reduction in non-operating losses and to a lesser extent, the
aforementioned improvement in operating performance during the quarter.
TELECOMMUNICATIONS SECTOR
The following table details Quinenco's proportional share of income from
investments in the Telecommunications sector during 2002 and 2003:
Page 15 of 21
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QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Fourth quarter 2003
--------------------------------------------------------------------------------
TELECOMMUNICATIONS
---------------------------------------------------------------------------------------------------
Ownership 4Q 2002 2002 4Q 2003 4Q 2003 2003 2003
% MCh$ MCh$ MCh$ MUS$ MCh$ MUS$
---------------------------------------------------------------------------------------------------
Telsur 73.6% 1,277 4,478 1,616 2.7 5,468 9.2
Entel (1) 5.7% 1,056 2,361 893 1.5 3,414 5.7
---------------------------------------------------------------------------------------------------
(1) Non-controlling interest.
TELSUR
------------------------------------------------------------------------------------------------------------
Telsur Quarter Accumulated for Year
------------------------------------------------------------------------------------------------------------
4Q 2002 4Q 2003 4Q 2003 2002 2003 2003
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
------------------------------------------------------------------------------------------------------------
Sales 12,935 13,114 22.1 49,270 51,469 86.7
Operating income (loss) 3,498 3,189 5.4 13,230 12,317 20.7
Net Income (loss) 1,845 2,195 3.7 6,088 7,430 12.5
Total Assets 139,754 131,796 222.0
Shareholders' equity 57,883 60,917 102.6
------------------------------------------------------------------------------------------------------------
Full Year 2003 Results
Telsur's revenues reached Ch$51,469 million (US$86.7 million) in 2003, an
increase of 4.5% over the Ch$49,270 million (US$83.0 million) reported in 2002.
The increase in consolidated revenues mainly corresponded to internet, security
services and business services, which began to consolidate with Telsur in 2002.
As these subsidiaries, which were previously in the development stage, entered
into the consolidation in different months of the year, year-over-year
comparisons are not directly comparable. In 2003, these non-regulated services
contributed 18% of total consolidated revenue. The increase in non-regulated
services more than offset the drop in long distance and public telephony
revenues experienced during the year. Basic telephony and access charge revenues
were flat in 2003.
Basic telephony services accounted for 52.0% of all revenues, followed by user
access charges (11.2%), long distance services (9.2%), public telephones (6.0%),
and other non-regulated services (21.6%), which include internet provider
services, security services, voice data, call center, telephone guides and
equipment sales, among others.
Fixed telephony traffic (in minutes) fell by 14% in 2003, mainly due to the
effects of substitution from fixed to mobile and internet alternatives. The
number of fixed lines in services grew however by 3.5% to a total of 178,168
lines in service, fueled by prepaid subscribers. Long distance revenues were
affected by lower traffic in minutes and prices.
In spite of the increase in the company's sales level and a reduction of 2.1% in
SG&A expenses, operating profit decreased by 6.9% to Ch$12,317 million (US$20.7
million) in 2003. As internet, security services and business services did not
consolidate the entire year in 2002, a direct comparison of operating results is
not possible however, in general terms, the operating margin associated with
these business segments does not yet fully compensate for the reduction in
operating profit associated with traditional telephony services.
As a result, the operating margin as a percentage of sales was 23.9%, down from
26.9% in 2002. Telsur's cash generating capacity improved in 2003 thanks to the
addition of the non-regulated services, with EBITDA reaching Ch$25,014 million
(US$42.1 million), up from Ch$23,913 million (US$40.3 million) in 2002.
Non-operating losses were Ch$2,797 million (US$4.7 million), down by 25.4% from
the Ch$3,752 million (US$6.3 million) reported in 2002.
Net profit in 2003 amounted to Ch$7,430 million (US$12.5 million), representing
a 22.0% increase from the Ch$6,088 million (US$10.3 million) reported in 2002.
The increase in bottom line results for the year was attributable to the
aforementioned improvement in non-operating results as well as the fact that in
2002
Page 16 of 21
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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 Fourth quarter 2003
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Telsur incurred extraordinary restructuring costs of Ch$1,541 million (US$2.6
million) which reduced net income in that year.
4Q 2003 Results
Telsur's sales increased by 1.4% to Ch$13,114 million (US$22.1 million) in the
fourth quarter of 2003, mainly due to the consolidation of internet services
(November of 2002). This increase more than offset 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.
Operating profit declined by 8.8% to Ch$3,189 million (US$5.4 million),
partially due to the inclusion of depreciation and other costs associated with
internet services, the margins of which do not yet offset the drop in operating
profit associated with traditional telephony services.
Telsur's non-operating losses decreased by 69.2% to Ch$340 million (US$0.6
million) in 4Q 2003. The reduction in non-operating losses was mainly related to
an improvement in price-level restatement results, lower non-operating expenses
as well as higher non-operating income. The improvement in non-operating results
led to an increase in net profit of 19% in the fourth quarter of the year. Net
profit amounted to Ch$2,195 million (US$3.7 million).
Page 17 of 21
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QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Fourth quarter 2003
--------------------------------------------------------------------------------
MANUFACTURING SECTOR
The following table details Quinenco's proportional share of income (loss) from
investments in the Manufacturing sector during 2002 and 2003:
MANUFACTURING
---------------------------------------------------------------------------------------------------
Ownership 4Q 2002 2002 4Q 2003 4Q 2003 2003 2003
% MCh$ MCh$ MCh$ MUS$ MCh$ MUS$
---------------------------------------------------------------------------------------------------
Madeco 55.2% (2,307) (22,542) (6,196) (10.4) (10,717) (18.0)
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MADECO
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Madeco Quarter Accumulated for Year
-----------------------------------------------------------------------------------------------------
4Q 2002 4Q 2003 4Q 2003 2002 2003 2003
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
-----------------------------------------------------------------------------------------------------
Sales 54,888 53,712 90.5 258,845 237,666 400.2
Operating income (loss) (961) 176 0.3 4,043 7,457 12.6
Net Income (loss) (4,330) (11,212) (18.9) (40,568) (16,734) (28.2)
Total assets 381,934 353,676 595.6
Shareholders' equity 100,224 147,569 248.5
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Full Year 2003 Results
Madeco's sales level declined by Ch$21,179 million (US$35.7 million) or 8.2% to
Ch$237,666 million (US$400.2 million) in 2003. The deterioration in sales during
the year was mainly attributable to lower sales of the cable unit, particularly
in Brazil. Sales corresponding to the cable unit fell by Ch$21,876 million
(US$36.8 million) or 16.5% to Ch$110,526 million (US$186.1 million) as a
consequence of weak demand for metal cables in Brazil which affected sales
volumes as well as the effect on sales of the appreciation of the Chilean peso
vis-a-vis the US dollar under Chilean GAAP. To a much lesser extent, the brass
mills business unit also contributed to the downturn in sales, having
experienced a 1.7% decline, mainly as a result of lower coin blank exports.
Madeco's flexible packaging and aluminum profiles business units showed modest
improvement in 2003, increasing their sales by 1.9% and 3.0%, respectively.
Sales of the cable business unit accounted for 46.5% of total sales, followed by
brass Mills (23.6%), flexible Packaging (17.6%) and aluminum Profiles (12.3%).
In spite of the sharp decline in sales, Madeco reported an 84.4% increase in
operating profit, which reached Ch$7,457 million (US$12.6 million) in 2003. The
rise in operating profit was attributable to a 22.2% decrease in SG&A expenses,
which more than offset the decline in gross profit associated with the company's
lower sales level. SG&A expenses were reduced as part of a company-wide effort
to carve out efficiencies. The operating margin as a percentage of sales rose to
3.1% in 2003, compared to 1.6% in 2002. Operating profit by business unit was:
cable (-Ch$1,021 million, -US$1.7 million), brass mills (Ch$1,448 million,
US$2.4 million), flexible packaging (Ch$3,257 million, US$5.5 million) and
aluminum profiles (Ch$3,773 million, US$6.4 million).
Madeco reported non-operating losses of Ch$22,076 million (US$37.2 million),
down from the Ch$48,050 million (US$80.9 million) reported in 2002, mostly
explained by lower non-operating expenses, which in 2002 included write-offs and
provisions for accounts receivable, unused assets and severance payments mostly
related to its Argentina subsidiary. In addition, a 35.4% reduction in interest
expense and the absence of exchange rate losses due to the appreciation of the
Chilean peso vis-a-vis the Brazilian real, the Argentine peso and Peruvian sole
also served to reduce non-operating losses for the period. Interest expense
incurred in 2003 reflected the company's lower debt level following its
financial restructuring as well as lower prevailing interest rates. Worth noting
is that in 2003 Madeco provisioned for a loss on its investment in Optel of
Page 18 of 21
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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 Fourth quarter 2003
--------------------------------------------------------------------------------
Ch$4,917 million (US$8.3 million). Optel is an optic fiber joint venture with
Corning which is currently inactive and pending liquidation.
In spite of the marked improvement at the operating level in all of Madeco's
business units except cable, the company's bottom line for the year 2003
reflects the aforementioned non-operating losses. The net loss for the period
amounted to Ch$16,734 million (US$28.2 million), significantly less than the
Ch$40,568 million loss (US$68.3 million) reported in 2002, a year in which the
company was also impacted by the regional slowdown in investment levels.
4Q 2003 Results
Madeco's sales level in the fourth quarter of 2003 fell by 2.1% from Ch$54,888
million (US$92.4 million) to Ch$53,712 million (US$90.5 million). The decline in
sales corresponded to a reduction in sales of the wire and cable unit (-Ch$2,211
million or -US$3.7 million), partially offset by increases in the sales of
Madeco's other three business units (Ch$1,052 million or US$1.8 million). Worth
mentioning is that as of the fourth quarter of 2003, Optel, the optic fiber
subsidiary in Brazil, no longer consolidates with Madeco as it is in the process
of liquidation following the arbitration resolution in November. The effect of
the consolidation is not material to Madeco's results of operations.
Despite a 4.3% increase in volumes, sales of the wire and cable unit decreased
by 8.6% to Ch$23,636 million (US$39.8 million) mainly due to the appreciation of
the Chilean peso vis-a-vis the US dollar, the effect of which reduced sales
corresponding to Madeco's foreign operations. Sales of the wire and cable
business unit (whose principal operation is Ficap Brazil) accounted for 44.0% of
total sales, followed by brass mills (24.8%), flexible packaging (17.7%) and
aluminum profiles (13.5%).
In spite of the decline in quarterly sales, operating income increased by
Ch$1,137 million (US$1.9 million) to Ch$176 million (US$0.3 million), reverting
4Q 2002 operating losses. The improvement in quarterly operating profit was the
result of 29.0% lower SG&A expenses in Madeco's four business units as part of a
company-wide cost savings plan. As a percentage of sales, the operating margin
was 0.3% in 4Q 2003.
Non-operating losses went from Ch$6,089 million (US$10.3 million) in 4Q 2002 to
Ch$10,103 million (US$17.0 million) in 4Q 2003. The variation in non-operating
losses is mainly explained by foreign currency translation results which in 4Q
2002 amounted to gains of Ch$10,150 million (US$17.1 million), compared to
losses of Ch$1,168 million (US$2.0 million) in the fourth quarter of 2003. The
loss generated in 4Q 2003 was due to the effect of the revaluation of the
Chilean peso on US dollar net assets (the composition of net assets having
changed following Madeco's financial restructuring in which US dollar debt was
reduced considerably) as well as translation losses from foreign subsidiaries.
The increase in non-operating losses was partially offset by a reduction in
interest expense of 60.6% reported during the period as a consequence of the
financial restructuring and capital increase which took place earlier in the
year which facilitated debt pay-down. Similarly, other non-operating expenses
declined by 36.9% to Ch$8,590 million (US$14.5 million) in 4Q 2003. Other
non-operating expenses included a provision for the liquidation of Madeco's
investment in Optel for Ch$4,917 million (US$8.3 million) and the write-down of
assets in Argentina and in the coin blank subsidiary, Armat, for Ch$2,751
million (US$4.6 million).
The net loss for the fourth quarter of 2003 was Ch$11,212 million (US$18.9
million), compared to a net loss of Ch$4,330 million (US$7.3 million) reported
in 4Q 2002, mainly as a consequence of the aforementioned deterioration in
non-operating results.
REAL ESTATE/HOTEL ADMINISTRATION
The following table details Quinenco's proportional share of income from
investments in the Real Estate/Hotel Administration sector during 2002 and 2003:
Page 19 of 21
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QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Fourth quarter 2003
--------------------------------------------------------------------------------
REAL ESTATE/HOTEL ADMINISTRATION
---------------------------------------------------------------------------------------------------
Ownership 4Q 2002 2002 4Q 2003 4Q 2003 2003 2003
% MCh$ MCh$ MCh$ MUS$ MCh$ MUS$
---------------------------------------------------------------------------------------------------
Hoteles Carrera 90.0% 128 (871) (954) (1.6) (4,781) (8.1)
Habitaria 50.0% 258 453 (226) (0.4) (336) (0.6)
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HOTELES CARRERA
------------------------------------------------------------------------------------------------------------
Hoteles Carrera Quarter Accumulated for Year
------------------------------------------------------------------------------------------------------------
4Q 2002 4Q 2003 4Q 2003 2002 2003 2003
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
------------------------------------------------------------------------------------------------------------
Sales 2,100 2,119 3.6 7,086 6,671 11.2
Operating income (loss) 258 286 0.5 (382) (211) (0.4)
Net Income (loss) 149 (1,060) (1.8) (1,006) (5,315) (9.0)
Total assets 23,438 11,610 19.6
Shareholders' equity 14,666 8,539 14.4
------------------------------------------------------------------------------------------------------------
Full Year 2003 Results
The Santiago Hotel Carrera was sold in November 2003 pursuant to an agreement
with the Ministry of Foreign Relations of Chile for UF832,000 (approx. US$23.7
million). Prior to its sale, the Santiago hotel was Hoteles Carrera's main
asset, accounting for approximately 60% of consolidated revenues. Following the
disposal, Carrera's activities are limited to operating a wholly-owned four star
hotel in Concepcion as well as three leased hotels in the north of Chile. The
leases on the northern hotels expire during 2004. Hoteles Carrera reported a
loss on the sale of the Santiago hotel of Ch$4,713 million (US$7.9 million)
which mostly explains the net loss of Ch$5,315 million (US$9.0 million) reported
for the year 2003.
4Q 2003 Results
Hoteles Carrera reported a net loss of Ch$1,060 million (US$1.8 million) for the
fourth quarter of 2003 as a result of the disposal of its main activity in
November. Carrera will continue to operate its remaining hotel in Concepcion
once the leases held on the northern hotels expire in 2004.
Page 20 of 21
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QUINENCO S.A.
Enrique Foster Sur No. 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.cl Fourth quarter 2003
--------------------------------------------------------------------------------
HABITARIA
Habitaria Quarter Accumulated for Year
------------------------------------------------------------------------------------------------------------
4Q 2002 4Q 2003 4Q 2003 2002 2003 2003
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
------------------------------------------------------------------------------------------------------------
Sales 7,963 3,505 5.9 23,236 18,066 30.4
Operating income (loss) 603 (227) (0.4) 1,409 50 0.1
Net Income (loss) 516 (449) (0.8) 907 (672) 1.1
Total assets 47,408 35,464 59.7
Shareholders' equity 17,565 16,893 28.4
------------------------------------------------------------------------------------------------------------
Full Year 2003 Results
Habitaria reported a net loss of Ch$672 million (US$1.1 million) in 2003,
compared to a net profit of Ch$907 million (US$1.5 million) in 2002. During
2003, Habitaria's sales dropped by approximately 22% to Ch$18,066 million
(US$30.4 million). 2003 sales were aggravated by the poor market conditions
which prevailed throughout most of the year, with particularly weak demand for
housing. In addition, Habitaria had few units come onto the market during 2003
which also contributed to the downturn. During 2003, Habitaria recorded sales
corresponding to 275 units, well below the 436 units sold in 2002, although the
sales mix favored higher priced housing units.
Since Habitaria recognizes income (and its corresponding cost) related to the
sale of its housing units only upon final execution of the purchase agreement.
Administration and overhead expenses are recognized when incurred. Therefore,
financial results may reflect a mis-matching of revenues and expenses.
As of December 31, 2003, Habitaria had pre-sold an additional 52 apartments to
be delivered in future periods (not included in 2003 sales revenues). Its
inventory of finished stock as of December 31, 2003 (excluding pre-sold units as
of the same date) was 218 apartments and homes. During 2004, Habitaria is
expected to finish constructing three additional phases of ongoing projects.
4Q 2003 Results
Habitaria reported consolidated sales of Ch$3,505 million (US$5.9 million) in
the fourth quarter of 2003, a decrease of 56.0% from the Ch$7,963 million
(US$13.4 million) reported in 4Q 2002. During the fourth quarter, Habitaria sold
52 housing units compared to 141 units sold in the same period of 2002, although
the sales mix favored more expensive housing units. Although market conditions
were very poor in the last quarter of the year, especially for housing units,
the situation was further exacerbated by the fact that Habitaria had few housing
units come onto the market. Operating results suffered as a consequence of the
contraction in sales, and Habitaria reported operating losses of Ch$227 million
(US$0.4 million) and a net loss for the fourth quarter of the year of Ch$449
million (US$0.8 million).
#
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 21 of 21
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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
--------------------------------------------------------------------------------