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 August 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 18 August 2004 announcing second quarter 2004 consolidated
results
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.com Second Quarter 2004
--------------------------------------------------------------------------------
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 2004
(Santiago, Chile, August 18, 2004) 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, 2004.
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 (0.6% year-over-year). Figures in US$ have been
converted from Chilean pesos (Ch$) at the observed exchange rate on June 30,
2004 (Ch$636.30 = US$1.00) and are only provided for the reader's convenience.
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2Q 2004 HIGHLIGHTS
- Consolidated sales rose by 7.5% in 2Q 2004 to Ch$100,174 million (US$132.4
million), mainly attributable to Madeco's revenues which experienced
growth of 38.4% quarter-over-quarter.
- Operating income benefited from the improvement in Madeco's quarterly
performance, increasing by 70.5% to Ch$8,611 million (US$13.5 million).
- Results from equity method investments reflected continued growth of Banco
de Chile and CCU. Income from equity method investments increased by 37.0%
to Ch$14,133 million (US$22.2 million).
- Non-operating losses were reduced by 96.0% to Ch$410 million (US$0.6
million) in 2Q 2004.
- Net income amounted to Ch$6,524 million (US$10.3 million) in the second
quarter of 2004, a marked improvement from the Ch$134 million (US$0.2
million) reported in 2Q 2003 as a consequence of the improvement in
operating and non-operating results.
- Earnings per share amounted to Ch$6.04 (US$0.01) and earnings per ADR to
Ch$60.42 (US$0.09) for the second quarter of 2004.
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Page 1 of 15
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QUINENCO S.A.
Enrique Foster Sur N(0) 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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GROUP HIGHLIGHTS - SECOND QUARTER 2004 AND SUBSEQUENT EVENTS
Quinenco Announces Purchase of 11.41% of Almacenes Paris
On August 18, 2004, Quinenco reported to the Chilean Superintendency of
Securities and Insurance (SVS) that it had entered into an agreement to purchase
68,489,407 shares of Almacenes Paris, one of Chile's largest retail department
store chains.
The shares are being acquired from Inmobiliaria e Inversiones Aconcagua S.A., an
investment company owned by the Galmez family, for Ch$514 per share. The terms
of the agreement provide for the share acquisition and payment thereof, on or
before October 14, 2004.
Following the acquisition, which is currently valued at approximately Ch$35,204
million (equivalent to approximately US$55.4 million on announcement date),
Quinenco or a wholly-owned subsidiary will hold an 11.41% interest in Almacenes
Paris.
Quinenco Dividend Distribution
On April 30, 2004, at the General Ordinary Shareholders' Meeting, shareholders
approved a definitive dividend distribution of Ch$6.20807 per share (Ch$62.08070
per ADR), charged against 2003 net earnings. The distribution, which amounted to
Ch$6,703,101,992 was payable beginning May 11, 2004 to shareholders of record as
of May 5, 2004.
The total dividend payout corresponding to 2003 net earnings was
Ch$18,847,424,544, equivalent to Ch$17.45552 per share (Ch$174.55520 per ADR)
and 50% of net income for the year.
Empresas Lucchetti Changes Its Name to Industria Nacional de Alimentos
At the General Ordinary Shareholders' Meeting on April 28, 2004, shareholders
agreed to change Empresas Lucchetti's name to Industria Nacional de Alimentos
S.A (Indalsa).
Banco de Chile Share Repurchase
On March 26, 2004, Banco de Chile launched a tender offer to repurchase up to
1,701,994,590 shares, equivalent to 2.5% of its outstanding common stock, at
Ch$31 pesos per share. The tender offer expired on April 26, 2004. Acceptance
orders exceeded the share offering and as a result, shares were purchased on a
prorate basis (34.03%). Capital and reserves were reduced by Ch$52,762 million.
Under local regulations, Banco de Chile will have up to two years to resell the
shares. As a result of the share repurchase, Quinenco's dividend rights
associated with its investment in Banco de Chile (and SM Chile) increased to
29.9% and its voting rights increased to 53.5%.
Madeco Raises an Additional US$9 million on the Santiago Stock Exchange
On July 1, 2004, Madeco sold 138,956,755 shares (at Ch$41 per share) on the
Santiago Stock Exchange, resulting in proceeds to Madeco of Ch$5,697 million
(equivalent to US$9.0 million on transaction date). The shares represented the
remaining unsubscribed and unpaid shares of the capital increase approved by
Madeco's Board of Directors in 2002. Madeco's total outstanding shares now
amount to 4,259,045,163 shares. Quinenco did not subscribe for additional shares
and as a result, its interest in Madeco was reduced from 55.2% to 53.4%.
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QUINENCO S.A.
Enrique Foster Sur N(0) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
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QUINENCO S.A.
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Net Income Contribution
--------------------------------------------------------------------------------------------------------------------
Quinenco's
ownership % at 2Q 2003 1Q 2004 2Q 2004 2Q 2004 YTD 2003 YTD 2004
Sector/Company 6/30/2004 MCh$ MCh$ MCh$ MUS$ MCh$ MCh$
--------------------------------------------------------------------------------------------------------------------
Financial Services:
Banco de Chile (1)(3) 53.5% 10,288 11,191 13,457 21.1 19,499 24,648
--------------------------------------------------------------------------------------------------------------------
Food & Beverage:
CCU (4) 30.8% (303) 5,087 (17) -- 9,880 5,070
Indalsa (Ex-Lucchetti) (1) 95.6% (156) 806 (1,548) (2.4) (818) (743)
--------------------------------------------------------------------------------------------------------------------
Telecommunications:
Telsur (1) 73.6% 1,173 1,215 1,230 1.9 2,463 2,445
Entel (2) 5.7% 604 819 708 1.1 1,727 1,527
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Manufacturing:
Madeco (1) 55.2% 16 946 1,667 2.6 (4,307) 2,613
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Other operating companies (392) (474) (420) (0.6) (679) (893)
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Total operating companies 11,230 19,590 15,077 23.7 27,765 34,667
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Quinenco & holding companies (11,097) (11,065) (8,553) (13.4) 12,841 (19,618)
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Total 133 8,525 6,524 10.3 40,606 15,049
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The figures provided in the above table correspond to Quinenco's proportionate
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.
(3) As a consequence of the share repurchase that Banco de Chile carried out
in 2004, Quinenco's dividend rights in the bank increased from 29.2% to
29.9%. Ownership % in the above table corresponds to voting rights in
Banco de Chile.
(4) Operating company which is controlled jointly between Quinenco and
Heineken Int'l (through a shareholders' agreement).
Net Income - 2Q 2004
Quinenco reported net income for the second quarter of 2004 which amounted
to Ch$6,524 million (US$10.3 million), compared to net income of Ch$133
million (US$0.2 million) in the second quarter of 2003. Quarterly results
benefited from both an increase in the net income contribution from
Quinenco's operating companies and improved results at the Quinenco
corporate level.
The net income contribution from operating companies reached Ch$15,077
million (US$23.7 million), up by 34.3% compared to the second quarter of
2003. The increase was mostly attributable to higher results from Banco de
Chile and Madeco, both of which experienced strong growth in net income
during the period.
Earnings per ordinary share amounted to Ch$6.04 (US$0.01) and earnings per
ADR, Ch$60.42 (US$0.09).
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QUINENCO S.A.
Enrique Foster Sur N(0) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
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QUINENCO S.A.
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Consolidated Income Statement Breakdown
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2Q 2003 1Q 2004 2Q 2004 2Q 2004 YTD 2003 YTD 2004
MCh$ MCh$ MCh$ MUS$ MCh$ MCh$
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Revenues
------------------------------------------------------------------------------------------------------------
Madeco 62,357 74,829 86,291 135.4 125,145 161,119
Telsur 12,919 12,717 12,854 20.2 25,687 25,571
Indalsa (ex Lucchetti) 15,885 1,093 (3) -- 30,458 1,090
Quinenco & holding 1,997 1,638 1,032 1.6 4,136 2,670
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Total 93,158 90,277 100,174 132.4 185,426 190,450
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Operating income (loss)
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Madeco 3,405 5,993 8,102 12.7 5,596 14,095
Telsur 3,010 2,875 3,024 4.7 6,100 5,900
Indalsa (ex Lucchetti) 999 306 (208) (0.3) 1,299 98
Quinenco & holding (2,363) (2,420) (2,307) (3.6) (4,602) (4,728)
------------------------------------------------------------------------------------------------------------
Total 5,051 6,754 8,611 13.5 8,393 15,365
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Non-operating income (loss)
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Interest income 845 562 545 0.9 1,610 1,107
Share of net income/loss from
related co:
Banco de Chile 10,288 11,191 13,457 21.1 19,499 24,648
CCU (303) 5,087 (17) -- 9,880 5,070
Entel 604 819 708 1.1 1,727 1,527
Other equity investments (271) (287) (15) -- (764) (301)
Other non-op income 553 1,621 3,566 5.6 37,186 5,187
Amortization of GW expense (5,145) (5,133) (5,107) (8.0) (10,372) (10,240)
Interest expense (9,149) (8,606) (6,553) (10.3) (19,527) (15,159)
Other non-op expenses (7,517) (1,405) (5,200) (8.2) (12,122) (6,606)
Price-level restatement (2,667) 1,243 (633) (1.0) (401) 610
Foreign exchange gains & losses 2,632 (514) (1,161) (1.8) 216 (1,675)
------------------------------------------------------------------------------------------------------------
Total (10,130) 4,578 (410) (0.6) 26,932 4,168
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Income Tax (741) (1,773) (196) (0.3) (1,613) (1,969)
Extraordinary items -- -- -- -- -- --
Minority Interest (457) (1,507) (1,993) (3.1) (96) (3,500)
Amortization of negative GW 6,411 473 512 0.8 6,990 985
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Net income (loss) 134 8,525 6,524 10.3 40,606 15,049
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Revenues - 2Q 2004
Consolidated revenues for the second quarter of 2004 were Ch$100,174
million (US$132.4 million), up by 7.5% from the Ch$93,158 million
(US$146.4 million) reported in the second quarter of 2003. The increase in
consolidated sales is attributable to a 38.4% increase in sales at Madeco,
partially offset by the reduction in Indalsa's (ex Lucchetti) sales
following the disposal of its Chilean-based pasta, edible oil and soup
operations (as a consequence of the disposal of its main business activity
in March 2004, Lucchetti, in accordance with instructions from the SVS,
did not consolidate the results of its operations during the first
quarter). 2Q consolidated sales can be broken down as follows: Madeco
(86.1%), Telefonica del Sur (12.8%), Indalsa (ex Lucchetti) (0.0%) and
others (1.1%).
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QUINENCO S.A.
Enrique Foster Sur N(0) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
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Operating Income - 2Q 2004
Operating income for the second quarter of 2004 was Ch$8,611 million
(US$13.5 million), up by 70.5% from the Ch$5,051 million (US$7.9 million)
reported in the second quarter of 2003. The sharp increase in consolidated
operating income was attributable to Madeco's operations, which benefited
from the strong hike in sales as well as improvements in operating
profitability.
EBITDA - 2Q 2004
EBITDA reached Ch$16,026 million (US$25.2 million) in 2Q 2004, compared to
Ch$13,808 million (US$21.7 million) in 2Q 2003, an increase of 16.1%
compared to the same period of 2003.
Non-Operating Results -2Q 2004
Quinenco reported a non-operating loss of Ch$410 million (US$0.6 million)
in the second quarter of 2004, compared to a non-operating loss of
Ch$10,130 million (US$15.9 million) in the same quarter of 2003. The main
items included in non-operating results are discussed below:
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$14,133 million (US$22.2 million), compared to Ch$10,318 million
(US$16.2 million) in 2Q 2003, an increase of 37.0%. The increase
mainly corresponded to an increase in the proportionate share of net
income from Banco de Chile whose 2Q 2004 quarterly results increased
by Ch$3,169 million (US$5.0 million) to Ch$13,457 million (US$21.1
million). To a lesser extent, the increase in the proportionate
share of net income from CCU and Entel also served to boost 2Q
results from equity method investments.
Other non-operating income
Other non-operating income was Ch$3,566 million (US$5.6 million),
compared to Ch$553 million (US$0.9 million) in the second quarter of
2003. Other non-operating income in 2Q 2004 was mainly composed of
an additional gain recognized in the second quarter associated with
the sale of Lucchetti Chile of Ch$2,978 million (US$4.7 million),
related to adjustments in working capital 90 days following the
disposal, in accordance with the terms of the sales agreement. This
additional gain is partially offset by a loss provision of Ch$1,134
million (US$1.8 million) included with other non-operating expenses
related to the disposal.
Amortization of goodwill expense
Amortization of goodwill expense amounted to Ch$5,107 million
(US$8.0 million) in the second quarter of 2004, almost unchanged
from the Ch$5,145 million (US$8.1 million) reported in the same
period of 2003. 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$321,268 million (US$504.9 million) as of June 30, 2004,
Ch$290,380 million (US$456.4 million) was associated with the Banco
de Chile acquisition. Goodwill is amortized using the straight-line
method over twenty years.
Page 5 of 15
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QUINENCO S.A.
Enrique Foster Sur N(0) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
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Interest Expense
Interest expense for the second quarter of 2004 amounted to Ch$6,553
million (US$10.3 million), a reduction of 28.4% compared to the same
period in 2003. The decrease is primarily associated with a lighter
consolidated debt load at the Quinenco corporate level, Indalsa (ex
Lucchetti) and Madeco, and to a lesser extent, lower prevailing
interest rates.
Other non-operating expenses
Other non-operating expenses amounted to Ch$5,200 million (US$8.2
million) compared to Ch$7,517 million (US$11.8 million) in the
second quarter of 2003. Other non-operating expenses are mostly
composed of loss provisions associated with the disposal of
Lucchetti Chile and the liquidation of Lucchetti's Peruvian plant.
Price-level restatement and foreign currency translation losses
Price-level restatement losses amounted to Ch$633 million (US$1.0
million) in the second quarter of 2004, compared to losses of
Ch$2,667 million (US$4.2 million) in the same period in 2003. In 2Q
2004, price-level restatement losses are mainly due to the increase
in the inflation rate used for adjustment purposes from 0.7% in 2Q
2003 to 1.3% in 2Q 2004.
Losses specific to foreign currency differences amounted to Ch$1,161
million (US$1.8 million), compared to gains on foreign currency
translation of Ch$2,632 million (US$4.1 million) reported in the
second quarter of 2003, primarily attributable to Madeco's
operations as a result of translation losses during the second
quarter associated with its Brazilian and Argentine operations.
Income Taxes - 2Q 2004
Quinenco reported income tax expense of Ch$196 million (US$0.3 million),
compared to income tax expense of Ch$741 million (US$1.2 million) in the
same period of 2003. The reduction in income tax expenses mainly
corresponded to Madeco as a result of income tax credits related to tax
refunds.
Minority Interest - 2Q 2004
In the second quarter of 2004, Quinenco reported a deduction from income
of Ch$1,993 million (US$3.1million), compared to a deduction from income
of Ch$457 million (US$0.7 million) in 2Q 2003. The amount is mainly
related to minority shareholders' proportionate share of Madeco's and
Telefonica del Sur's second quarter 2004 income.
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QUINENCO S.A.
Enrique Foster Sur N(0) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
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CONSOLIDATED BALANCE SHEET ANALYSIS (vis-a-vis the 1st quarter of 2004)
Condensed Consolidated Balance Sheet
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As of As of As of As of
6/30/03 3/31/04 6/30/04 6/30/04
MCh$ MCh$ MCh$ MUS$
--------------------------------------------------------------------------------------------
Current assets 265,207 268,834 230,695 362.6
Fixed assets 380,551 294,277 291,384 457.9
Other assets 839,620 798,646 782,888 1,230.4
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Total assets 1,485,378 1,361,757 1,304,967 2,050.9
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Current liabilities 233,492 146,484 204,661 321.6
Long-term liabilities 507,816 461,794 364,859 573.4
Minority interest 69,220 101,493 104,073 163.6
Shareholders' equity 674,850 651,986 631,374 992.3
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Total liabilities & shareholders' equity 1,485,378 1,361,757 1,304,967 2,050.9
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Current Assets
Current assets decreased 14.2% compared to the first quarter of 2004,
mainly due to the payment of dividends (Quinenco) and obligations at the
intermediate holding company level and at Madeco.
Fixed Assets and Other Assets
Fixed assets and other assets did not vary significantly from the first
quarter of 2004, decreasing by 1.0% and 2.0%, respectively.
Current Liabilities
Current liabilities increased by 39.7% compared to the first quarter of
2004, primarily due to the reclassification of bank obligations from
long-term to short-term in accordance with scheduled amortization payments
(LQIF), partially offset by a reduction in short-term bond obligations at
Madeco.
Long-term Liabilities
Long-term liabilities decreased by 21.0% versus 1Q 2004, mostly as a
result of the reclassification of long-term debt to short term in
accordance with scheduled amortization payments at the Quinenco corporate
level.
Minority Interest
Minority interest increased by 2.5% compared to the first quarter of 2004,
mostly attributable to minority interest in Madeco.
Equity
Shareholders' equity decreased by 3.2% compared to the first quarter of
2004, mostly attributable to the adjustment to Other reserves in
shareholders' equity made in relation to the Banco de Chile share buyback
which implied a reduction in net worth (LQIF) amounting to Ch$23,214
million (US$36.5 million).
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Phone (56-2) 750-7100
Fax # (56-2) 750-7101
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Quinenco Corporate Level Debt and Cash
As of June 30, 2004, financial debt at the corporate level was Ch$322,200
million (US$506.4 million). As of the same date, cash and cash equivalents
amounted to Ch$42,876 million (US$67.4 million). The debt to total
capitalization ratio at the corporate level was 33.7%.
NAV
As of June 30, 2004, the estimated net asset value (NAV) of Quinenco was
US$1.453 billion (Ch$856 per share) and market capitalization was US$916
million (Ch$540 per share). The discount to NAV is estimated at 37% as of
the same date.
[PIE CHART OMITTED]
[LINE CHART OMITTED]
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QUINENCO S.A.
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Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
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SECTOR /OPERATING COMPANY ANALYSIS
FINANCIAL SERVICES SECTOR
The following table details Quinenco's proportionate share of income from
investments in the Financial Services sector during 2003 and 2004:
FINANCIAL SERVICES
--------------------------------------------------------------------------------------------------
Ownership 2Q 2003 YTD 2003 1Q 2004 2Q 2004 2Q 2004 YTD 2004
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$
--------------------------------------------------------------------------------------------------
Banco de Chile (1) 53.5% 10,288 19,499 11,191 13,457 21.1 24,648
--------------------------------------------------------------------------------------------------
1) As a consequence of the share repurchase that Banco de Chile carried out
in 2004, Quinenco's dividend rights in the bank increased from 29.2% to
29.9%. Ownership % in the above table corresponds to voting rights in
Banco de Chile.
BANCO DE CHILE
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Quarter Accumulated for Year
--------------------------------------------------------------------------------------------------------
2Q 2003 2Q 2004 2Q 2004 YTD 2003 YTD 2004 YTD 2004
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
--------------------------------------------------------------------------------------------------------
Operating revenues 112,442 121,684 191.2 214,196 228,150 358.6
Provision for loan losses (17,022) (18,648) (29.3) (30,422) (33,118) (52.0)
Operating expenses (56,073) (55,383) (87.0) (109,490) (110,683) (173.9)
Net Income (loss) 35,487 44,486 69.9 66,890 82,381 129.5
--------------------------------------------------------------------------------------------------------
Loan portfolio 6,271,194 6,546,302 10,288.1
Total assets 9,342,179 9,566,505 15,034.6
Shareholders' equity 638,948 599,368 942.0
--------------------------------------------------------------------------------------------------------
Net interest margin 3.1% 4.6%
Net Financial Margin 4.1% 4.3%
Efficiency ratio 49.9% 45.5%
ROAE 22.4% 29.5%
ROAA 1.6% 1.8%
-------------------------------------------------
2Q 2004 Results
Operating revenues increased by 8.2% to Ch$121,684 million (US$191.2 million) in
the second quarter of 2004. The increase in operating revenues was mainly due to
an 18.9% jump in the amount of fee income earned during the second quarter of
the year and a 7.8% increase in net financial income, the effects of which were
partially offset by lower (net) gains on sales of financial instruments.
Fee income, which reached Ch$28,733 million (US$45.2 million), equivalent to
23.6% of total operating revenues, increased as a result of higher fee income
associated with banking services (an increase of 14.9%) as well as subsidiary
non-banking services, particularly fund management (an increase of 25.5%).
Operating income was also boosted by higher net financial income which rose from
Ch$85,258 million (US$134.0 million) in 2Q 2003 to Ch$91,870 million (US$144.4
million) in 2Q 2004. Net financial income, which is calculated as the sum of net
interest revenue and foreign exchange transactions (net), comprised 75.5% of
operating revenues in 2Q 2004. The increase in net financial income was
primarily due to a
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Phone (56-2) 750-7100
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3.7% growth in average interest earning assets and an increase in the net
financial margin as a result of the higher inflation experienced during the
period, higher lending spreads and a better funding mix. The increase in
operating revenues experienced during the quarter was partially offset by a
reduction in gains on the sale of financial instruments (net) which fell by
Ch$1,935 million (US$3.0 million to Ch$1,081 million (US$1.7 million). The
variation is explained by earnings associated with the disposal of Argentine
securities in the second quarter of 2003.
Provisions, which amounted to Ch$18,648 million (US$29.3 million), showed an
increase of 9.6% from the Ch$17,022 million (US$26.8 million) reported in the
second quarter of 2003. The higher level of provisions was associated with the
telecom, manufacturing and transport sectors, as well as the expansion of the
loan portfolio and exposure in Mexico.
Other income and expenses amounted to Ch$6,098 million (US$9.6 million), an
increase of 93.8% over the Ch$3,146 million (US$4.9 million) reported in 2Q
2003. Other income and expenses was mainly composed of loan recoveries
(previously written off) of Ch$8,130 million (US$12.8 million), partially offset
by other non-operating expenses of Ch$3,368 million (US$5.3 million).
Operating expenses declined by 1.2% to Ch$55,383 million (US$87.0 million)
compared to the second quarter of 2003, primarily due to lower administrative,
other and depreciation expenses, which more than offset the 6.8% increase in
personnel salaries and expenses experienced during the period. Salaries and
employee expenses were affected by an increase in variable commissions and
higher headcount.
Price-level restatement losses totaled Ch$4,505 million (US$7.1 million)
compared to price-level restatement losses of Ch$2,041 million (US$3.2 million)
reported in 2Q 2003. The losses in 2Q 2004 reflect the higher inflation
experienced during the period (1.3% adjustment).
Net income increased by 25.4% to Ch$44,486 million (US$69.9 million) in 2Q 2004,
the highest quarterly earnings level ever achieved by the bank. The increase in
net earnings was mainly fueled by the aforementioned growth in operating
revenues and other income which included significant income related to the
recovery of loans previously written-off.
As of June 2004, the Bank's loan portfolio (net of interbank loans) had grown by
4.4% to Ch$6,546,302 million (US$10.3 billion) over the last twelve month
period, mostly in consumer loans, other outstanding loans and contingent loans.
The increase in consumer loans was in response to the economic reactivation
currently underway and low prevailing interest rates.
Banco de Chile is the second ranked bank in the country with a market share of
17.8% according to information published by the Chilean Superintendency of Banks
for the period ended June 30, 2004. Its return on capital and reserves after
taxes (annualized) reached 31.9%, compared to 18.2% for the local financial
system, according to the same source.
Page 10 of 15
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QUINENCO S.A.
Enrique Foster Sur N(0) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.com Second Quarter 2004
--------------------------------------------------------------------------------
FOOD & BEVERAGE SECTOR
The following table details Quinenco's proportionate share of income (loss) from
investments in the Food & Beverage sector during 2003 and 2004:
FOOD & BEVERAGE
---------------------------------------------------------------------------------------------------
Ownership 2Q 2003 YTD 2003 1Q 2004 2Q 2004 2Q 2004 YTD 2004
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$
---------------------------------------------------------------------------------------------------
CCU 30.8% (303) 9,880 5,087 (17) -- 5,070
Indalsa (ex Lucchetti) 95.6% (156) (818) 806 (1,548) (2.4) (743)
---------------------------------------------------------------------------------------------------
CCU
---------------------------------------------------------------------------------------------------
Quarter Accumulated for Year
---------------------------------------------------------------------------------------------------
2Q 2003 2Q 2004 2Q 2004 YTD 2003 YTD 2004 YTD 2004
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
---------------------------------------------------------------------------------------------------
Sales 77,625 84,074 132.1 178,936 195,801 307.7
Operating income (loss) 1,053 3,946 6.2 16,597 27,462 43.2
Net Income (loss) (982) (55) (0.1) 32,089 16,460 25.9
---------------------------------------------------------------------------------------------------
Total Assets 669,356 559,883 879.9
Shareholders' equity 279,938 284,277 446.8
---------------------------------------------------------------------------------------------------
2Q 2004 Results
CCU's sales in the second quarter of 2004 grew by 8.3% compared to the second
quarter of 2003, due to an increase in consolidated sales volumes and higher
average prices. The growth in sales volumes was led by the soft drinks, nectar
and mineral water segment (+3.3%), the Argentine beer segment (+8.3%), the
Chilean beer segment (+2.3%) and the Chilean domestic wine segment (+5.5%).
Higher average prices are mostly explained by the Argentine and Chilean beer
segments, whose average prices increased by 26.9% and 6.5%, respectively, and to
a lesser extent by the wine and soft drinks segments (+8.4% and 0.5%,
respectively).
Operating income jumped by 274.7% to Ch$3,946 million (US$6.2 million), mainly
due to an increase of 15.7% in gross profit, which resulted from the higher
sales level achieved during the quarter. The increase in operating income was
partially offset by an increase in SG&A expense associated with the Chilean and
Argentine beer segments as well as the soft drinks segment. The consolidated
operating margin, which reflects the seasonality of CCU's business in the winter
months, reached 4.7% of sales, compared to 1.4% in the same period of 2003.
CCU reported non-operating losses of Ch$3,094 million (US$4.9 million) compared
to non-operating losses of Ch$1,740 million (US$2.7 million) in 2Q 2003. 2Q 2004
non-operating results were affected by a reduction in financial income due to
lower prevailing interest rates and a lower level of cash and cash equivalents,
a decrease in price-level restatement gains and an increase in foreign exchange
losses. The effect of these reductions was partially offset by an improvement in
results from related companies and lower losses associated with other
non-operating losses, which in 2Q 2003 included expenses related to the
extraordinary dividends paid in 2003 and a higher level of fixed asset
write-offs.
Net results improved by 94.4% in relation to 2Q 2003, amounting to a net loss of
Ch$55 million (US$0.1 million) for the quarter. The improvement in bottom line
results was due to the aforementioned
Page 11 of 15
--------------------------------------------------------------------------------
QUINENCO S.A.
Enrique Foster Sur N(0) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.com Second Quarter 2004
--------------------------------------------------------------------------------
improvement in operating results, partially offset by higher non-operating
losses and income taxes, the latter of which rose in connection with the beer
and soft drinks segments and a higher level of deferred taxes.
INDUSTRIA NACIONAL DE ALIMENTOS (EX-LUCCHETTI)
----------------------------------------------------------------------------------------------
Quarter Accumulated for Year
----------------------------------------------------------------------------------------------
2Q 2003 2Q 2004 2Q 2004 YTD 2003 YTD 2004 YTD 2004
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
----------------------------------------------------------------------------------------------
Sales 15,885 (3) -- 30,458 1,090 1.7
Operating income (loss) 999 (208) (0.3) 1,299 98 0.2
Net Income (loss) (167) (1,619) (2.5) (874) (777) (1.2)
----------------------------------------------------------------------------------------------
Total Assets 74,873 29,095 45.7
Shareholders' equity 15,573 27,460 43.2
----------------------------------------------------------------------------------------------
2Q 2004 Results
Lucchetti sold its principal business, the Chilean-based pasta, edible oil and
soup business (Lucchetti Chile) on March 31, 2004 (in consideration of this
fact, the Chilean Superintendency of Securities and Insurance (SVS) authorized
Empresas Lucchetti to deconsolidate Lucchetti Chile's balance sheet and results
of operations for the quarter ended March 31st)). Lucchetti reported a gain on
sale made in connection with the disposal of Lucchetti Chile of Ch$1,293 million
(US$2.0 million) in 1Q 2003, subject to adjustments for working capital. During
the second quarter, Lucchetti received Ch$1,837 million (net) (US$2.9 million)
in connection with adjustments to the original sales price.
Following the divestiture of its pasta business, Empresas Lucchetti's remaining
assets principally consist of its investment in Calaf, a joint venture with
ECUSA, a subsidiary of CCU, acquired in January 2004 and Lucchetti Peru,
including settlement rights in its ongoing arbitration against the Peruvian
government.
TELECOMMUNICATIONS SECTOR
The following table details Quinenco's proportionate share of income from
investments in the Telecommunications sector during 2003 and 2004:
TELECOMMUNICATIONS
-------------------------------------------------------------------------------------
Ownership 2Q 2003 YTD 2003 1Q 2004 2Q 2004 2Q 2004 YTD 2004
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$
-------------------------------------------------------------------------------------
Telsur 73.6% 1,173 2,463 1,215 1,230 1.9 2,445
Entel (1) 5.7% 604 1,727 819 708 1.1 1,527
-------------------------------------------------------------------------------------
(1) Non-controlling interest
Page 12 of 15
--------------------------------------------------------------------------------
QUINENCO S.A.
Enrique Foster Sur N(0) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.com Second Quarter 2004
--------------------------------------------------------------------------------
TELSUR
-------------------------------------------------------------------------------------------
Quarter Accumulated for Year
-------------------------------------------------------------------------------------------
2Q 2003 2Q 2004 2Q 2004 YTD 2003 YTD 2004 YTD 2004
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
-------------------------------------------------------------------------------------------
Sales 12,919 12,854 20.2 25,687 25,571 40.2
Operating income (loss) 3,010 3,025 4.8 6,100 5,900 9.3
Net Income (loss) 1,594 1,670 2.6 3,349 3,320 5.2
-------------------------------------------------------------------------------------------
Total Assets 138,230 130,189 204.6
Shareholders' equity 60,192 62,534 98.3
-------------------------------------------------------------------------------------------
2Q 2004 Results
Telefonica del Sur's revenues reached Ch$12,854 million (US$20.2 million)
varying only slightly from the Ch$12,919 million (US$20.3 million) reported in
the second quarter of 2003. Nonetheless, the revenue mix favored non-regulated
services such as Internet, security services and business services. A decline in
revenue associated with fixed telephony, access charges, long distance and
public telephony was almost entirely offset by a 27% increase in revenues from
Internet, security services, and business services, including data transmission.
While in general terms substitution of fixed telephony for mobile telephony and
other alternatives has continued to capture a portion of the company's
traditional sale base, Telsur has successfully bolstered its product base to
rely on revenue generation from non-regulated services. Basic telephony services
accounted for 51.7% of all revenues, followed by user access charges (10.8%),
long distance services (8.3%), public telephones (5.4%), and other non-regulated
services (23.8%).
Operating profit also remained stable during the quarter reaching Ch$3,025
million (US$4.8 million). In spite of the fact that the non-regulated services
still have higher associated costs than Telsur's traditional fixed line
telephony business, the company was able to offset the effect by reducing SG&A
expenses, mostly in terms of headcount and ad campaigns.
Telsur reported non-operating losses of Ch$835 million (US$1.3 million), down by
15.8% from the non-operating losses of Ch$992 million (US$1.6 million) reported
in 2Q 2003. The improvement in non-operating results was primarily attributable
to a reduction in interest expense as a result of a lighter debt load and lower
prevailing interest rates and a decrease in price-level restatement losses.
Telsur reported net income of Ch$1,670 million (US$2.6 million), an increase of
4.8% compared to the second quarter of 2003, mainly as a result of the
aforementioned improvement in non-operating results.
Page 13 of 15
--------------------------------------------------------------------------------
QUINENCO S.A.
Enrique Foster Sur N(0) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.com Second Quarter 2004
--------------------------------------------------------------------------------
MANUFACTURING SECTOR
The following table details Quinenco's proportionate share of income (loss) from
investments in the Manufacturing sector during 2003 and 2004:
MANUFACTURING
------------------------------------------------------------------------------------------
Ownership 2Q 2003 YTD 2003 1Q 2004 2Q 2004 2Q 2004 YTD 2004
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$
------------------------------------------------------------------------------------------
Madeco (1) 55.2% 16 (4,307) 946 1,667 2.6 2,613
------------------------------------------------------------------------------------------
(1) On July 1, 2004, Quinenco's interest in Madeco was reduced to 53.4%
MADECO
----------------------------------------------------------------------------------------------
Quarter Accumulated for Year
----------------------------------------------------------------------------------------------
2Q 2003 2Q 2004 2Q 2004 YTD 2003 YTD 2004 YTD 2004
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
----------------------------------------------------------------------------------------------
Sales 62,357 86,290 135.6 125,145 161,119 253.2
Operating income (loss) 3,405 8,102 12.7 5,596 14,095 22.2
Net Income (loss) 17 3,018 4.7 (5,110) 4,732 7.4
----------------------------------------------------------------------------------------------
Total assets 389,371 355,443 558.6
Shareholders' equity 153,308 161,841 254.3
----------------------------------------------------------------------------------------------
2Q 2004 Results
Madeco's sales in the second quarter of 2004 increased by Ch$23,933 million
(US$37.6 million) or 38.4% from Ch$62,357 million (US$98.0 million) to Ch$86,290
million (US$135.6 million), primarily attributable to higher sales of the wire
and cable and brass mill business units which rose by 63.0% and 44.8%,
respectively. Wire and cable sales, which accounted for Ch$17,826 million
(US$28.0 million) of the total increase, benefited from strong demand for
metallic cables in Peru and higher average prices in its principal markets.
Higher average prices and volumes boosted brass mill sales in Chile and
Argentina by Ch$5,398 million (US$8.5 million), as well as a significant
increase in coin blank sales (+68.4%).
Sales of the wire and cable business unit (whose principal operation is Ficap
Brazil) accounted for 53.4% of total sales, followed by brass mills (24.3%),
flexible packaging (13.7%) and aluminum profiles (8.6%).
The higher sales level was directly reflected in operating profits amounting to
Ch$8,102 million (US$12.7 million), up by more than 137% from the Ch$3,405
million (US$5.4 million) reported in the second quarter of 2003. The improved
operating performance was attributable to strong increases in the operating
income in three of Madeco's four business units, namely wire & cable, brass
mills and flexible packaging, reflecting the higher sales level, an improvement
in productivity and a reduction in SG&A expenses as a percentage of sales. The
operating margin reached 9.4%, a marked improvement from the 5.5% seen one year
ago.
Non-operating losses amounted to Ch$5,653 million (US$8.9 million) versus
Ch$3,178 million (US$5.0 million) in 2Q 2003. The increase in non-operating
losses was mainly attributable to foreign currency translation losses which
amounted to Ch$1,574 million (US$2.5 million), compared to foreign currency
translation gains of Ch$2,628 million (US$4.1 million) in 2Q 2003. The increase
in non-operating losses was partially offset by a reduction of 20.3% in interest
expense (Ch$2,720 million, US$4.3 million) in relation to a lower debt load and
lower prevailing interest rates.
Page 14 of 15
--------------------------------------------------------------------------------
QUINENCO S.A.
Enrique Foster Sur N(0) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.com Second Quarter 2004
--------------------------------------------------------------------------------
Madeco reported a net profit of Ch$3,018 million (US$4.7 million) for the second
quarter of 2004, compared to net income of Ch$17 million (US$27 thousand) in 2Q
2003. The improvement in net quarterly earnings was attributable to the
aforementioned improvement in Madeco's operating performance during the quarter
as well as tax benefits which amounted to Ch$732 million (US$1.2 million), the
effects of which were partially offset by an increase in non-operating losses.
#
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 15 of 15
--------------------------------------------------------------------------------
QUINENCO S.A.
Enrique Foster Sur N(0) 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/s Luis Fernando Antunez
------------------------------------
Name: Luis Fernando Antunez
Title: Authorized Representative
Dated: August 19, 2004