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 2005
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 announcing Quinenco's fourth quarter and full year 2004
consolidated results
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.com Fourth Quarter 2004
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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 2004 CONSOLIDATED
FOURTH QUARTER AND YEAR END RESULTS
(Santiago, Chile, March 16, 2005) 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, 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 (2.5% year-over-year). Figures in US$ have been
converted from Chilean pesos (Ch$) at the observed exchange rate on December 31,
2004 (Ch$557.40 = US$1.00) and are only provided for the reader's convenience.
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2004 HIGHLIGHTS
- Consolidated sales rose by 4.4% in 2004 to Ch$382,511 million (US$686.2
million), mainly attributable to Madeco's revenues, which experienced
growth of 33.0%, the effect of which was partially offset by the divesture
of Lucchetti Chile in March 2004.
- Operating income benefited from the improvement in Madeco's performance,
increasing by 108.2% to Ch$27,197 million (US$48.8 million) in 2004.
- The contribution from operating companies to Quinenco's net income in 2004
reached Ch$63,470 million (US$113.9 million), up 35.4% from 2003.
- Net income amounted to Ch$23,353 million (US$41.9 million) in 2004. Net
income reflects the strong operating gains achieved by group companies as
well as a reduction in non-operating results due to the absence of
non-recurring income of Ch$36, 936 million (US$66.3 million) reported by
Quinenco in 2003 in connection with an arbitration settlement from its
ex-partners in CCU.
- Earnings per ordinary share amounted to Ch$21.63 (US$0.04) and Ch$216.28
(US$0.39) per ADR in 2004.
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QUINENCO S.A.
Enrique Foster Sur N(O) 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.com Fourth Quarter 2004
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GROUP HIGHLIGHTS - FOURTH QUARTER 2004 AND SUBSEQUENT EVENTS
Almacenes Paris
On March 7, 2005, Quinenco, through its subsidiary, Inversiones Rio Azul S.A.,
Consorcio Financiero S.A. and Parque Arauco S.A, launched a tender offer for
27.3% of the outstanding shares of Almacenes Paris, one of Chile's largest
retail department store chains. The tender offer, which will conclude on April
6, 2005, consists of the offer to purchase 164,000,000 shares of Almacenes Paris
at Ch$900 per share. At the conclusion of the tender offer and assuming it is
successful, Rio Azul, Consorcio Financiero and Parque Arauco would have an
interest in Paris of 20.1%, 20.1% and 10%, respectively, for a total of 50.2% of
the outstanding shares. The total acquisition price of the tender offer is
Ch$147,600,000,000 (equivalent to US$251.1 million on March 7, 2005). The tender
offer would be financed with internal resources of the three parties and if
necessary, by funds obtained from the offerer's shareholders.
Quinenco, through Rio Azul, currently holds an 11.41% interest in Paris. This
interest was acquired in October 2004 through the purchase of 68,489,407 shares
at Ch$514 pesos per share for a total of Ch$35,398 million.
CCU
On February 21, 2005, CCU announced that it was negotiating a strategic alliance
with Control, one of the leading pisco producers in Chile. This association was
approved by Control's assembly on March 12, 2005. As a result, CCU's subsidiary,
Pisconor and a subsidiary of Control will form a new company with an estimated
50% share of the Chilean pisco market.
Indalsa- Lucchetti Peru
On February 7, 2005, the International Centre for Settlement of Investment
Disputes in Washington DC (ICSID) ruled that it had no jurisdiction over
arbitration proceedings between Lucchetti Peru and the Peruvian government.
Lucchetti Peru is at present analyzing its legal options in this case.
Banco de Chile
On January 21, 2005, Banco de Chile announced that the Office of the Comptroller
of the Currency (OCC) was conducting a targeted examination of its New York
branch to determine its compliance with the US Bank Secrecy Act and anti-money
laundering requirements. Simultaneously, the Federal Reserve Bank of Atlanta is
conducting a similar review of the Miami branch. The bank has reported that
these investigations are likely to result in supervisory actions, although the
nature and extent of such actions cannot be determined at this time.
Madeco
During the last quarter of 2004, Madeco's main executives were granted shares of
Madeco in accordance with the company's stock incentive program. Madeco's total
outstanding subscribed and paid shares increased from 4,259,045,163 to
4,441,192,887. As a result, Quinenco participation in Madeco decreased from
53.4% to 51.2%.
Extraordinary Shareholders' Meeting Held on November 5, 2004
On November 5, 2004, Quinenco held an extraordinary shareholders' meeting to
approve a reduction in the number of members of the board from nine to seven.
The composition of Quinenco's Board is now as follows: Guillermo Luksic,
Andronico Luksic, Jean-Paul Luksic, Gonzalo Menendez, Hernan Buchi, Juan Andres
Fontaine and Matko Koljatic. All of these board members had served on the Board
prior to the extraordinary shareholders' meeting.
Quinenco's Financial Sector Subsidiary Places Bonds in the Local Market, Raising
UF7,000,000
On October 28, 2004, LQ Inversiones Financieras (LQIF), a wholly-owned
subsidiary of Quinenco and the holding company which owns a controlling interest
in Banco de Chile, issued bonds for UF7,000,000 (equivalent to approximately
US$196 million on the placement date) in the Chilean market. The proceeds from
the bond issue were used to refinance existing debt.
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QUINENCO S.A.
Enrique Foster Sur N(O) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
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[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.com Fourth Quarter 2004
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Net Income Contribution
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Quinenco's Full Year Full Year Full Year
ownership % 4Q 2003 3Q 2004 4Q 2004 4Q 2004 2003 2004 2004
Sector/Company 12/31/2004 MCh$ MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
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Financial Services:
Banco de Chile (1)(3) 53.5% 8,320 11,549 9,018 16.2 38,998 45,612 81.8
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Food & Beverage:
CCU (4) 30.8% 5,720 1,616 7,217 12.9 17,073 13,985 25.1
Indalsa (Ex-Lucchetti) (1) 97.0% (1,342) (805) (2,402) (4.3) (2,082) (3,962) (7.1)
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Telecommunications:
Telsur (1) 73.7% 1,656 1,206 1,362 2.4 5,604 5,053 9.1
Entel (2) 5.7% 916 21 1,123 2.0 3,499 2,695 4.8
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Manufacturing:
Madeco (1) 51.2% (6,351) 1,563 397 0.7 (10,984) 4,615 8.3
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Other operating companies (1,210) (83) (3,537) (6.3) (5,246) (4,528) (8.1)
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Total operating companies 7,709 15,067 13,178 23.6 46,862 63,470 113.9
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Quinenco & holding companies (10,447) (9,093) (11,090) (19.9) (8,225) (40,117) (72.0)
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Total 2,738 5,974 2,088 3.7 38,637 23,353 41.9
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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 early 2004, Quinenco's dividend rights in the bank increased from 29.2%
to 29.9% and voting rights increased from 52.2% to 53.5%. 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 - Full Year 2004
Quinenco reported net income of Ch$23,353 million (US$41.9 million) in 2004,
compared to 2003's net income of Ch$38,637 million (US$69.3 million). 2003 net
profit included non-recurring income (included with Quinenco & holding
companies) of Ch$36,936 million (US$66.3 million) related to a settlement
payment from its ex-partners in CCU, which largely explains the variation
between the two years. The reduction in net income was partially offset by a
35.4% increase in the contribution from operating companies, most notably Banco
de Chile and Madeco.
Earnings per ordinary share amounted to Ch$21.63 (US$0.04) and Ch$216.28
(US$0.39) per ADR in 2004.
Net Income - 4Q 2004
Quinenco reported net income in the fourth quarter of 2004 which amounted to
Ch$2,088 million (US$3.7 million), compared to a net loss of Ch$2,738 million
(US$4.9 million) in the fourth quarter of 2003. Quarterly results benefited from
a 70.9% increase in the net income contribution from Quinenco's operating
companies, the effect of which was partially offset by lower results at the
Quinenco corporate level.
The net income contribution from operating companies reached Ch$13,178 million
(US$23.6 million), up by Ch$5,469 million (US$9.8 million) from the fourth
quarter of 2003. The increase in the quarterly contribution from operating
companies was driven by Madeco, whose 4Q 2003 loss was totally reverted and to a
lesser extent, Banco de Chile and CCU.
Earnings per ordinary share amounted to Ch$1.93 and earnings per ADR, Ch$19.34
(US$0.03).
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QUINENCO S.A.
Enrique Foster Sur N(O) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.com Fourth Quarter 2004
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Consolidated Income Statement Breakdown
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4Q 2003 3Q 2004 4Q 2004 4Q 2004 YTD 2003 YTD 2004
Sector/Company MCh$ MCh$ MCh$ MUS$ MCh$ MCh$
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Revenues
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Madeco 55,024 85,816 74,512 133.7 243,608 342,035
Telsur 13,435 13,361 13,597 24.4 52,755 52,940
Indalsa (ex Lucchetti) 13,932 (11) (6) -- 60,593 1,090
Quinenco & holding 2,975 914 819 1.4 9,358 4,446
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Total 85,366 100,080 88,922 159.5 366,314 382,511
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Operating income (loss)
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Madeco 179 6,162 4,692 8.4 7,643 25,176
Telsur 3,267 3,273 3,293 5.9 12,625 12,561
Indalsa (ex Lucchetti) 826 (200) (229) (0.4) 2,967 (329)
Quinenco & holding (2,580) (2,578) (2,829) (5.1) (10,169) (10,211)
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Total 1,692 6,657 4,927 8.8 13,066 27,197
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Non-operating income (loss)
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Interest income 617 547 290 0.5 3,002 1,962
Share of net income/loss from related co:
Banco de Chile 8,319 11,549 9,018 16.2 38,998 45,612
CCU 5,720 1,616 7,217 12.9 17,073 13,985
Entel 916 21 1,123 2.0 3,499 2,695
Other equity investments (179) 157 (3,673) (6.6) (739) (3,823)
Other non-op income 483 248 1,424 2.6 38,959 6,942
Amortization of GW expense (4,879) (5,171) (4,997) (9.0) (20,597) (20,572)
Interest expense (6,261) (5,858) (7,462) (13.4) (36,072) (28,723)
Other non-op expenses (13,834) (4,000) (5,294) (9.5) (46,889) (16,006)
Price-level restatement 1,041 (83) (894) (1.6) 1,939 (357)
Foreign exchange gains & losses (820) 1,359 642 1.2 1,009 299
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Total (8,877) 385 (2,606) (4.7) 182 2,014
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Income tax (3) 731 (686) (1.2) (2,633) (1,955)
Extraordinary items -- -- -- -- -- --
Minority interest 3,884 (2,085) (1,083) (1.9) 3,911 (6,725)
Amortization of negative GW 566 286 1,536 2.7 24,111 2,822
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Net income (loss) (2,738) 5,974 2,088 3.7 38,637 23,353
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Revenues - Full Year 2004
Consolidated revenues in 2004 totaled Ch$382,511 million (US$686.2 million), an
increase of 4.4% from the Ch$366,314 million (US$657.2 million) reported in
2003. The increase in sales in 2004 was primarily attributable to Madeco's
operations, the effect of which was partially offset by Indalsa (ex-Lucchetti)
due to the divestment of its Chilean operations in early 2004. Madeco's sales,
which rose by 33.0% to Ch$324,035 million (US$581.3 million), were boosted by
strong demand for wire and cable and brass mill products.
Consolidated sales in 2004 can be broken down as follows: Madeco (84.7%),
Telefonica del Sur (13.8%), Indalsa (ex Lucchetti) (0.3%) and others (1.2%).
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QUINENCO S.A.
Enrique Foster Sur N(O) 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 Fourth Quarter 2004
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Revenues - 4Q 2004
Consolidated revenues for the fourth quarter of 2004 were Ch$88,922 million
(US$159.5 million), up by 4.2% from the Ch$85,366 million (US$153.2 million)
reported in the fourth quarter of 2003. The increase in consolidated sales was
attributable to a 35.4% increase in sales at Madeco, partially offset by the
Ch$13,938 million (US$25.0 million) reduction in Indalsa's (ex Lucchetti) sales
following the disposal of its Chilean-based operations in March 2004. The
increase in Madeco's fourth quarter 2004 sales was primarily attributable to
higher sales of its wire and cable and brass mill business units. 4Q 2004
consolidated sales can be broken down as follows: Madeco (83.8%), Telefonica del
Sur (15.3%), Indalsa (ex Lucchetti) (0.0%) and others (0.9%).
Operating Income - Full Year 2004
Consolidated operating income was Ch$27,197 million (US$48.8 million) in 2004,
up by 108.2% from the Ch$13,066 million (US$23.4 million) reported in 2003. The
sharp increase in operating profit for the year was entirely attributable to
Madeco's operations, which benefited from strong sales, efficiency gains in
production and stable SG&A expenses. The rise in operating income was partially
offset by the divestment of Lucchetti's Chilean operations in early 2004
(-Ch$3,296 million, -US$5.9 million).
Operating Income - 4Q 2004
Operating income for the fourth quarter of 2004 was Ch$4,927 million (US$8.8
million), up by Ch$3,235 million (US$5.8 million) from the Ch$1,692 million
(US$3.0 million) reported in the fourth quarter of 2003. The sharp increase in
consolidated operating income was primarily attributable to Madeco's operations,
which benefited from the strong hike in sales as well as improvements in
operating profitability and a decline in SG&A expenses.
EBITDA - Full Year 2004
EBITDA amounted to Ch$52,779 million (US$94.7 million) in 2004, compared to
Ch$42,558 million (US$76.4 million) in 2003, an increase of 24.0%.
EBITDA - 4Q 2004
EBITDA reached Ch$10,978 million (US$19.7 million) in 4Q 2004, compared to
Ch$8,304 million (US$14.9 million) in 4Q 2003, an increase of 32.2% compared to
the same period in 2003.
Non-Operating Results - Full Year 2004
Non-operating income amounted to Ch$2,014 million (US$3.6 million) in 2004,
compared to non-operating income of Ch$182 million (US$0.3 million) in 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
reached Ch$58,469 million (US$104.9 million), almost unchanged from the
Ch$58,831 million (US$105.5 million) reported in 2003. Included with results
from equity method investments (net) is Quinenco's proportionate share of Banco
de Chile's net income which amounted to Ch$45,612 million (US$81.8 million), an
increase of 17.0% over 2003 and the highest in the bank's history. The other
main equity investment, CCU, reported a decline in its net profits due to the
absence of a non-recurring gain on sale of the disposal of the Croatian brewery,
which served to push down profits by 18.1% in 2004, thereby reducing Quinenco's
proportionate share to Ch$13,985 million (US$25.1 million). Equity income from
Entel amounted to Ch$2,695 million (US$4.8
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QUINENCO S.A.
Enrique Foster Sur N(O) 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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million), down by 23.0% from 2003 mainly as a consequence of asset and
receivable write-offs and inter-connection rate reductions associated with
mobile telephone services.
Quinenco reported a loss (net) of Ch$3,823 million (US$6.9 million) on other
equity investments, which were mostly composed of a loss of Ch$4,305 million
(US$7.7 million) made in connection with its 50% interest in Habitaria.
Habitaria's net loss in 2004 (Ch$8,609 million, US$15.4 million) was mainly due
to adjustments of property site book values to reflect current market value,
based on reappraisals.
Other non-operating income
Other non-operating income amounted to Ch$6,942 million (US$12.5 million), a
marked decline from the Ch$38,959 million (US$69.9 million) reported in 2003.
The variation is primarily explained by the settlement payment of Ch$36,936
million (US$66.3 million) received by Quinenco from its ex-partner in IRSA, the
holding company which controls 61.6% of CCU. Other non-operating income in 2004
was mainly composed of a gross gain on the sale of Lucchetti Chile of Ch$4,070
million (US$7.3 million) (note that the net gain on sale of Lucchetti Chile was
Ch$2,946 million, US$5.3 million).
Amortization of goodwill expense
Amortization of goodwill expense amounted to Ch$20,572 million (US$36.9 million)
in 2004, varying slightly from the Ch$20,597 million (US$37.0 million) reported
in 2003. Goodwill expense is mostly related to the Banco de Chile acquisition in
March 2001. Goodwill (net) corresponding to Banco de Chile amounted to
Ch$286,109 million (US$513.3 million) as of December 31, 2004 (this includes
goodwill of Ch$65,657 million (US$117.8 million) associated with the ex-Banco
Edwards acquisition in 1999). Goodwill is amortized over a twenty-year period,
using the straight-line method.
Interest Expense
Interest expense in 2004 amounted to Ch$28,723 million (US$51.5 million), a
20.4% decrease compared to the Ch$36,072 million (US$64.7 million) reported in
2003. The decrease is mainly explained by a reduction in the debt level of
Indalsa following the sale of its principal business. Likewise, Madeco, Telsur
and the holding level all reported lower interest expense during the year due to
reduced debt levels and lower prevailing interest rates.
Other non-operating expenses
Other non-operating expenses amounted to Ch$16,006 million (US$28.7 million),
compared to Ch$46,889 million (US$84.1 million) in 2003. In 2003, other
non-operating expenses included a loss of Ch$21,658 million (US$38.9 million)
related to Madeco's capital increase to which Quinenco did not subscribe
additional shares. Worth mentioning is that the effect of the non-subscription
in 2003 was totally offset by a credit to income for the same amount for
additional amortization of negative goodwill associated with Quinenco's interest
in Madeco's capital increase. See explanation below - Amortization of Negative
Goodwill.
Price-level restatement and foreign currency translation losses
In 2004, the gains specific to foreign currency translation amounted to Ch$299
million (US$0.5 million), compared to gains of Ch$1,009 million (US$1.8 million)
in 2003. In 2004, the gains on foreign currency translation mainly relate to the
revaluation of the Chilean peso vis-a-vis the US dollar.
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QUINENCO S.A.
Enrique Foster Sur N(O) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
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The price-level restatement loss amounted to Ch$357 million (US$0.6 million) in
2004, compared to a gain of Ch$1,939 million (US$3.5 million) reported in 2003
owing to the increase in the inflation rate used for adjustment purposes from 1%
in 2003 to 2.5% in 2004.
Non-Operating Results - 4Q 2004
Quinenco reported non-operating losses of Ch$2,606 million (US$4.7 million) in
the fourth quarter of 2004, compared to non-operating losses of Ch$8,877 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$13,685 million (US$24.6 million),
compared to Ch$14,776 million (US$26.5 million) in 2003, a decrease of 7.4%.
While Quinenco's proportionate share of net income in Banco de Chile, CCU and
Entel increased by 8.4%, 26.2% and 22.6%, respectively, its proportionate share
of the net loss from other equity investments increased to Ch$3,673 million
(US$6.6 million), mainly due to its 50% share of Habitaria's net loss for the
fourth quarter of the year as a consequence of the write-down of property
values.
Other non-operating income
Other non-operating income was Ch$1,424 million (US$2.6 million), compared to
Ch$483 million (US$0.9 million) in the fourth quarter of 2003.
Amortization of goodwill expense
Amortization of goodwill expense amounted to Ch$4,997 million (US$9.0 million)
in the fourth quarter of 2004, almost unchanged from the Ch$4,879 million
(US$8.8 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).
Interest Expense
Interest expense for the fourth quarter of 2004 amounted to Ch$7,462 million
(US$13.4 million), an increase of 19.2% compared to the same period in 2003. The
increase is primarily associated with Madeco's operations as the result of an
extraordinary charge of Ch$1,260 million (US$2.3 million) to results for the
amortization of goodwill associated with Madeco's Series A bonds, which were
prepaid in the last quarter of the year. The increase in interest expense was
partially offset by the reduction in Indalsa's (ex-Lucchetti) interest expense
which went from Ch$515 million (US$0.9 million) to Ch$4 million (US$7 thousand).
Other non-operating expenses
Other non-operating expenses amounted to Ch$5,294 million (US$9.5 million)
compared to Ch$13,834 million (US$24.8 million) in the fourth quarter of 2003,
mainly in relation to Madeco's operations. Other non-operating expenses are
mainly composed of a write-off of Ch$2,381 million (US$4.3 million) of
receivables from Lucchetti Peru and depreciation on assets not in use.
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QUINENCO S.A.
Enrique Foster Sur N(O) 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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Price-level restatement and foreign currency translation losses
Price-level restatement losses amounted to Ch$894 million (US$1.6 million) in
the fourth quarter of 2004, compared to gains of Ch$1,041 million (US$1.9
million) in the same period in 2003. In 4Q 2004, price-level restatement losses
are mainly due to the increase in the inflation rate used for adjustment
purposes of 0.6%.
Gains specific to foreign currency differences amounted to Ch$642 million
(US$1.2 million), compared to losses on foreign currency translation of Ch$820
million (US$1.5 million) reported in the fourth quarter of 2003. Foreign
currency differences are primarily attributable to Madeco's foreign operations
as a result of the revaluation of the Chilean peso vis-a-vis the US dollar in
the fourth quarter.
Income Taxes - Full Year 2004
Quinenco reported income taxes in 2004 amounting to Ch$1,955 million (US$3.5
million), compared to income taxes of Ch$2,633 million (US$4.7 million) in 2003.
Income Taxes - 4Q 2004
Quinenco reported income taxes of Ch$686 million (US$1.2 million), compared to
income tax expense of Ch$3 million (US$5 thousand) in the same period of 2003.
The variation in income taxes mainly corresponded to tax taxes corresponding to
Telsur's operations.
Minority Interest - Full Year 2004
In 2004, Quinenco reported a deduction from income of Ch$6,725 million (US$12.1
million), compared to an add-back to income of Ch$3,911 million (US$7.0 million)
in 2003 . The variation between the two years is mainly explained by the
turnaround in Madeco's net results in 2004. In 2004, minority interest is mainly
related to minority shareholders' proportionate share of Madeco's and Telsur's
net income reported in 2004.
Minority Interest - 4Q 2004
In the fourth quarter of 2004, Quinenco reported a deduction from income of
Ch$1,083 million (US$1.9 million), compared to a credit to income of Ch$3,884
million (US$7.0 million) in 4Q 2003. The amount is mainly related to minority
shareholders' proportionate share of Madeco's and Telefonica del Sur's fourth
quarter 2004 income.
Amortization of Negative Goodwill - Full Year 2004
Amortization of negative goodwill amounted to Ch$2,822 million (US$5.1 million)
in 2004, compared to Ch$24,111 million (US$43.3 million) in 2003. In 2004,
negative goodwill amortization mainly corresponded to Quinenco's investment in
Madeco and VTR (related to the investment in Entel). In 2003, the amount
amortized mostly corresponded to a one-time credit of Ch$21,658 million (US$38.9
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 net effect on income for the year 2003 was zero.
Amortization of Negative Goodwill - 4Q 2004
Amortization of negative goodwill amounted to Ch$1,536 million (US$2.8 million),
compared to Ch$566 million (US$1.0 million) in the fourth quarter of 2003. In
2004, negative goodwill amortization mainly corresponded to Quinenco's
investment in Madeco.
Page 8 of 19
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QUINENCO S.A.
Enrique Foster Sur N(O) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
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--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET ANALYSIS (vis-a-vis the 3rd quarter of 2004)
Condensed Consolidated Balance Sheet
----------------------------------------------------------------------------------------------------
As of As of As of As of
12/31/03 9/30/04 12/31/04 12/31/04
MCh$ MCh$ MCh$ MUS$
----------------------------------------------------------------------------------------------------
Current assets 255,283 242,771 211,568 379.6
Fixed assets 333,922 285,773 274,345 492.2
Other assets 836,939 798,296 849,785 1,524.5
----------------------------------------------------------------------------------------------------
Total assets 1,426,144 1,326,840 1,335,698 2,396.3
----------------------------------------------------------------------------------------------------
Current liabilities 165,959 207,494 143,903 258.2
Long-term liabilities 511,544 368,435 448,416 804.5
Minority interest 98,768 109,015 108,334 194.4
Shareholders' equity 649,873 641,896 635,045 1,139.2
----------------------------------------------------------------------------------------------------
Total liabilities & shareholders' equity 1,426,144 1,326,840 1,335,698 2,396.3
----------------------------------------------------------------------------------------------------
Current Assets
Current assets decreased 12.9% compared to the third quarter of 2004, mainly as
a result of the purchase of Almacenes Paris shares for Ch$35,398 million
(US$63.5 million) in October.
Fixed Assets and Other Assets
Fixed assets decreased by 4.0% compared to the third quarter of 2004, mainly due
to the effect on Madeco of the revaluation of the Chilean peso vis-a-vis the US
dollar on its US dollar held assets and depreciation for the period.
Other assets did not vary significantly from the third quarter of 2004.
Current Liabilities
Current liabilities decreased by 30.6% mainly as a consequence of the debt
restructuring carried out by LQIF in the fourth quarter, which replaced
short-term with long-term debt.
Long-term Liabilities
Long-term liabilities increased by 21.7% mainly as a consequence of the debt
restructuring carried out by LQIF in the fourth quarter, which replaced
short-term with long-term debt.
Minority Interest
Minority interest did not vary significantly from the third quarter of 2004.
Equity
Shareholders' equity did not vary significantly from the third quarter of 2004.
Page 9 of 19
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Phone (56-2) 750-7100
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--------------------------------------------------------------------------------
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--------------------------------------------------------------------------------
Quinenco Corporate Level Debt and Cash
As of December 31, 2004, financial debt with third parties at the corporate
level was Ch$347,211 million (US$622.9 million). As of the same date, cash and
cash equivalents amounted to Ch$18,600 million (US$33.4 million). The debt to
total capitalization ratio at the corporate level was 35.3%.
NAV
As of December 31, 2004, the estimated net asset value (NAV) of Quinenco was
US$1.989 billion (Ch$1,027 per share) and market capitalization was US$1.356
billion (Ch$700 per share). The discount to NAV is estimated at 32% as of the
same date.
[PIE CHART OMITTED]
[LINE CHART OMITTED]
Page 10 of 19
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SECTOR /OPERATING COMPANY ANALYSIS
FINANCIAL SERVICES SECTOR
The following table details Quinenco's proportionate share of income from
investments in the Financial Services sector during 2003 and 2004:
FINANCIAL SERVICES
---------------------------------------------------------------------------------------------------------------
Full Year Full Year Full Year
Ownership 4Q 2003 2003 3Q 2004 4Q 2004 4Q 2004 2004 2004
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$ MUS$
---------------------------------------------------------------------------------------------------------------
Banco de Chile (1) 53.5% 8,320 38,998 11,549 9,018 16.2 45,612 81.8
---------------------------------------------------------------------------------------------------------------
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% and voting rights increased from 52.2% to 53.5%. Ownership % in the
above table corresponds to voting rights in Banco de Chile.
BANCO DE CHILE
------------------------------------------------------------------------------------------------------------
Quarter Full Year
------------------------------------------------------------------------------------------------------------
4Q 2003 4Q 2004 4Q 2004 2003 2004 2004
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
------------------------------------------------------------------------------------------------------------
Operating revenues 104,067 121,358 217.7 427,134 469,823 842.9
Provision for loan losses (17,233) (20,915) (37.5) (61,612) (73,512) (131.9)
Operating expenses (60,427) (69,847) (125.3) (227,557) (240,302) (431.1)
Net income (loss) 28,231 30,970 55.6 133,817 152,628 273.8
------------------------------------------------------------------------------------------------------------
Loan portfolio, net 6,411,793 6,888,911 12,359.0
Total assets 9,481,150 9,649,203 17,311.1
Shareholders' equity 713,068 674,533 1,210.1
---------------------------------------------------
Net interest margin 1.0% 3.2%
Net financial Margin 3.9% 4.3%
Efficiency ratio 58.1% 57.6%
ROAE 16.0% 18.7%
ROAA 1.2% 1.3%
---------------------------------------------------
Full Year 2004 Results
Banco de Chile reported net income of Ch$152,628 million (US$273.8 million), for
the year ended December 31, 2004, surpassing its previous record net income of
Ch$133,817 million (US$240.1 million) in 2003. This increase, which represented
an increase of 14.1%, was mainly attributable to strong growth in fee income and
net financial income.
Operating revenues amounted to Ch$469,823 million (US$842.9 million), up 10.0%
from the Ch$427,134 million (US$766.3 million) reported in 2003. Fee income,
which accounted for 27.0% of operating revenues in 2004, was the main driver as
both the banking and subsidiary businesses experienced important fee income
growth. As a result, fee income jumped by 29.1% to Ch$126,842 million (US$227.6
million) in 2004. Likewise, net financial income also contributed to the growth
in operating revenues, increasing by 7% or Ch$22,712 million (US$40.7 million)
to Ch$346,132 million (US$621.0 million). Net financial income, which is the sum
of net interest income and net FX transactions, grew as a result of a 2.2%
increase in average interest earning assets, higher loan spreads, an
Page 11 of 19
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increase in the inflation rate (2.5% in 2004 vs. 1.0% in 2003), a better funding
mix and recovery of previously charged-off loans. The increase in operating
revenues was partially offset by a net loss on sales of financial instruments of
Ch$3,151 million (US$5.7 million).
Provisions for loan losses increased by 19.3% to Ch$73,512 million (US$131.9
million), mainly attributable to a 7.4% growth in the loan portfolio and to the
downgrading of a number of corporate clients in the construction sector.
Operating expenses increased by 5.6% to Ch$240,302 million (US$431.1 million)
compared to 2003, primarily due to higher personnel and administrative expenses
associated with a higher headcount and variable compensation packages. Despite
the increase in operating expenses in 2004, Banco de Chile's efficiency ratio
(measured as operating expenses to operating revenues) improved to 51.2% for the
twelve month period ended December 31, 2004, compared to 53.3% in 2003.
Price-level restatement losses totaled Ch$7,466 million (US$13.4 million)
compared to price-level restatement losses of Ch$4,137 million (US$7.4 million)
reported in 2003. The losses in 2004 reflect the higher inflation experienced
during the period (2.5% adjustment).
Income taxes increased from Ch$14,250 million (US$25.6 million) to Ch$18,349
million (US$32.9 million) due to a higher income tax base in 2004 and the rate
hike of 0.5% which was implemented in 2004.
As of December 2004, the Bank's loan portfolio had grown by to Ch$6,888,911
million (US$12,359 million). Loan portfolio growth was driven by increases in
other outstanding loans, commercial loans and contingent loans, all of which
were stimulated by the favorable economic conditions which prevailed in 2004.
Banco de Chile was the second ranked bank in the country (in terms of loans)
with a market share of 17.6% according to information published by the Chilean
Superintendency of Banks for the period ended December 31, 2004. Its return on
capital and reserves for the twelve-month period was 29.2%, the highest in the
Chilean financial system. The local financial system as a whole reported a
return on capital and reserves of 16.7% in 2004, according to the same source.
4Q 2004 Results
Operating revenues increased by 16.6% to Ch$121,358 million (US$217.7 million)
in the fourth quarter of 2004. The increase in operating revenues was mainly due
to a 29.3% jump in fee income earned during the fourth quarter of the year and a
15.8% increase in net financial income, the effects of which were partially
offset by a loss on the sales of financial instruments.
Fee income, which reached Ch$35,132 million (US$63.0 million), equivalent to
28.9% of total operating revenues, increased as a result of higher fee income
associated with banking services (an increase of 33.7%) as well as subsidiary
non-banking services, particularly fund management (an increase of 38.3%) and
stock brokerage services (+35.2%). Operating income was also boosted by higher
net financial income which rose from Ch$80,835 million (US$145.0 million) in 4Q
2003 to Ch$93,589 million (US$167.9 million) in 4Q 2004. Net financial income,
which is calculated as the sum of net interest revenue and foreign exchange
transactions (net), comprised 77.1% of operating revenues in 4Q 2004. The
increase in net financial income was primarily due to a 4.2% growth in average
interest earning assets and higher inflation experienced during the period. The
increase in operating revenues
Page 12 of 19
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Phone (56-2) 750-7100
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experienced during the quarter was partially offset by losses on the sale of
financial instruments (net) which increased by Ch$3,431 million (US$6.2 million)
to Ch$7,363 million (US$13.2 million). The variation between the two periods is
explained by marked to market losses related to a cross currency swap
transaction in the fourth quarter of the year.
Provisions, which amounted to Ch$20,915 million (US$37.5 million), showed an
increase of 21.4% from the Ch$17,233 million (US$30.9 million) reported in the
fourth quarter of 2003.
Operating expenses increased by 15.6% to Ch$69,847 million (US$125.3 million)
compared to the fourth quarter of 2003, primarily due to higher personnel and
administrative expenses associated with a higher headcount and variable
compensation packages.
Price-level restatement losses totaled Ch$1,894 million (US$3.4 million)
compared to price-level restatement gains of Ch$626 million (US$1.1 million)
reported in 4Q 2003. The losses in 4Q 2004 reflect the higher inflation
experienced during the period.
Net income increased by 9.7% to Ch$30,970 million (US$55.6 million) in 4Q 2004,
boosted by the strong growth in fee income and financial income, which more than
offset the increase in provisions for loan losses and operating expenses during
the period.
FOOD & BEVERAGE SECTOR
The following table details Quinenco's proportionate share of income (loss) from
investments in the Food & Beverage sector during 2003 and 2004:
FOOD & BEVERAGE
--------------------------------------------------------------------------------------------------------------------
Full Year Full Year Full Year
Ownership 4Q 2003 2003 3Q 2004 4Q 2004 4Q 2004 2004 2004
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$ MUS$
--------------------------------------------------------------------------------------------------------------------
CCU 30.8% 5,720 17,073 1,616 7,217 12.9 13,985 25.1
Indalsa (1) 97.0% (1,342) (2,082) (805) (2,402) (4.3) (3,962) (7.1)
--------------------------------------------------------------------------------------------------------------------
CCU
------------------------------------------------------------------------------------------------------
Quarter Full Year
------------------------------------------------------------------------------------------------------
4Q 2003 4Q 2004 4Q 2004 2003 2004 2004
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
------------------------------------------------------------------------------------------------------
Sales 120,956 126,499 226.9 393,666 420,638 754.6
Operating income (loss) 22,494 22,722 40.8 47,009 58,707 105.3
Net income (loss) 18,570 23,424 42.0 55,440 45,394 81.4
------------------------------------------------------------------------------------------------------
Total assets 591,664 592,241 1,062.5
Shareholders' equity 285,741 302,104 542.0
------------------------------------------------------------------------------------------------------
Full Year 2004 Results
CCU's consolidated sales revenues rose by 6.9% to Ch$420,638 million (US$754.6
million), attributable to a 4.2% increase in volume sold and higher average
prices. With the exception of wines, all of CCU's beverage segments experienced
volume increases in 2004, 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
Page 13 of 19
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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 2004 and CCU entered the pisco segment in 2004, both of which also served to
increase sales volumes for the year. Revenues by core businesses can be broken
down as follows: beer Chile (38.8%), beer Argentina (9.6%), soft drinks/mineral
water (28.6%), wine (19.5%) and others (3.5%) (worth noting is that pisco
revenues are included with others).
Operating income jumped by 24.9% to Ch$58,707 million (US$105.3 million) in
2004, due to improvements in the operating performance across all of CCU's
business segments. The increase in operating results associated with the beer
segments in Chile and Argentina accounted for 73.9% of the total Ch$11,698
million (US$21.0 million) increase. Both of these segments benefited from volume
and price increases as well as lower cost of goods sold related to the drop in
the value of the US dollar. In addition, a 19.3% and a 34.6% rise in operating
income from the soft drinks and wine segments (respectively) also contributed to
the higher profit level and was mainly the result of a reduction in COGS in US
dollars and SG&A expenses as a percentage of sales. EBITDA reached Ch$98,556
million (US$176.8 million) showing an increase of 11.3% over 2003.
CCU reported non-operating losses of Ch$6,178 million (US$11.1 million),
compared to non-operating income of Ch$13,941 million (US$25.0 million) in 2003.
The variation in non-operating results is mostly explained by an extraordinary
gain in 2003 of Ch$20,617 million (US$37.0 million) on the sale of CCU's
investment in Karlovacka. In spite of the marked improvement in CCU's operating
performance in 2004, which was reflected in a 24.9% increase in its operating
profits, net profit for the year dropped by 18.1% to Ch$45,394 million (US$81.4
million), as a result of the aforementioned reduction in non-operating results.
4Q 2004 Results
CCU's sales in the fourth quarter of 2004 grew by 4.6% compared to the fourth
quarter of 2003, due to an increase in consolidated sales volumes, the effect of
which was partially offset by lower average prices. Sales growth in volumes was
led by the Argentine and Chilean beer segments which rose by 5.8% and 4.2%,
respectively. These increases offset the modest 1.5% drop in wine volumes. Lower
average prices are mostly explained by the reduction in average prices of soft
drinks and beer in Chile.
Operating income increased by 1.0% to Ch$22,722 million (US$40.8 million). The
increase in operating income was mainly due to the higher sales level achieved
during the quarter although higher COGS and SG&A expenses partially offset this
effect. The consolidated operating margin reached 18.0% of sales, compared to
18.6% in the same period of 2003. EBITDA amounted to Ch$32,081 million (US$57.6
million), flat when compared to the same quarter in 2003.
CCU reported non-operating income of Ch$624 million (US$1.1 million) compared to
non-operating losses of Ch$3,288 million (US$5.9 million) in 4Q 2003. 4Q 2004
non-operating results benefited from a non-recurring sale of a property site and
lower price-level restatement losses as well as a comparatively lower debt level
and lower prevailing interest rates.
Net income improved by 26.1% in relation to 4Q 2003, amounting to Ch$23,424
million (US$42.0 million) for the quarter. The strong improvement in bottom line
results was due to the aforementioned improvement in non-operating results and
to a lesser extent, tax credits associated with the Argentine operation.
Page 14 of 19
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Phone (56-2) 750-7100
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INDUSTRIA NACIONAL DE ALIMENTOS (EX-LUCCHETTI)
------------------------------------------------------------------------------------------------------
Quarter Full Year
------------------------------------------------------------------------------------------------------
4Q 2003 4Q 2004 4Q 2004 2003 2004 2004
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
------------------------------------------------------------------------------------------------------
Sales 13,932 (6) -- 60,593 1,090 2.0
Operating income (loss) 826 (229) (0.4) 2,967 (329) (0.6)
Net income (loss) (1,400) (2,476) (4.4) (2,189) (4,107) (7.4)
------------------------------------------------------------------------------------------------------
Total assets 81,443 25,043 44.9
Shareholders' equity 28,584 24,606 44.1
------------------------------------------------------------------------------------------------------
Full Year 2004 Results
Lucchetti sold its principal business, the Chilean-based pasta, edible oil and
soup business (Lucchetti Chile) on March 31, 2004, recognizing a gain on sale
(net of provisions) in connection with the disposal of Lucchetti Chile of
Ch$2,946 million (US$5.3 million).
Following the divestiture of its Chilean 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,
which is in liquidation following the closure of its plant facilities in early
2003.
Indalsa reported a net loss of Ch$4,107 million (US$7.4 million) in 2004, mainly
attributable to the liquidation of the Peru plant and facilities (included with
other non-operating expenses), which amounted to Ch$5,732 million (US$10.3
million) and included a loss of the sale of machinery and equipment in Peru,
write-off of intercompany receivables and legal expenses. This effect was
partially offset by the aforementioned net gain on sale made in connection with
the March disposal of Lucchetti Chile of Ch$2,946 million (US$5.3 million).
4Q 2004 Results
Indalsa reported a net loss of Ch$2,476 million (US$4.4 million) in the fourth
quarter of 2004, mainly attributable to the liquidation of the Peruvian
facilities, which included a write-off of intercompany receivables of Ch$2,381
million (US$4.3 million).
TELECOMMUNICATIONS SECTOR
The following table details Quinenco's proportionate share of income from
investments in the Telecommunications sector during 2003 and 2004:
TELECOMMUNICATIONS
-----------------------------------------------------------------------------------------------------------------------------------
Full Year Full Year Full Year
Ownership 4Q 2003 2003 3Q 2004 4Q 2004 4Q 2004 2004 2004
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$ MUS$
-----------------------------------------------------------------------------------------------------------------------------------
Telsur 73.7% 1,656 5,604 1,206 1,362 2.4 5,053 9.1
Entel (1) 5.7% 916 3,499 21 1,123 2.0 2,695 4.8
-----------------------------------------------------------------------------------------------------------------------------------
(1) Non-controlling interest
Page 15 of 19
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TELSUR
------------------------------------------------------------------------------------------------------
Quarter Full Year
------------------------------------------------------------------------------------------------------
4Q 2003 4Q 2004 4Q 2004 2003 2004 2004
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
------------------------------------------------------------------------------------------------------
Sales 13,435 13,597 24.4 52,755 52,940 95.0
Operating income (loss) 3,267 3,294 5.9 12,625 12,561 22.5
Net income (loss) 2,249 1,849 3.3 7,616 6,861 12.3
------------------------------------------------------------------------------------------------------
Total assets 135,091 137,831 247.3
Shareholders' equity 62,440 63,995 114.8
------------------------------------------------------------------------------------------------------
Full Year 2004 Results
Telefonica del Sur's revenues reached Ch$52,940 million (US$95.0 million) in
2004, varying only slightly from the Ch$52,755 million (US$94.6 million)
reported in 2003. Although the sales level was constant, the revenue mix highly
favored non-regulated services, which in 2004 accounted for 39% of total
revenues, up from 35% in 2003. The Ch$2,444 million (US$4.4 million) or 13.2%
growth in non-regulated services offset the decline in revenues associated with
basic telephony and access charges, which fell by Ch$2,008 million (US$3.6
million) and Ch$252 million (US$0.5 million), respectively.
Fixed telephony traffic (in minutes) was down by 20.5%, following the downward
trend seen throughout the industry as users come to depend more on internet and
mobile communication alternatives. The number of fixed lines in services grew
however by 4.4% to a total of 185,970 lines in service, fueled by prepaid
subscribers. Long distance revenues were affected by lower prices, which more
than offset the 6.7% increase in long distance traffic (in minutes) in 2004.
Internet revenue jumped in 2004 by 34.9% to Ch$6,113 million (US$11.0 million)
in 2004, accounting for 11.5% of all sales. The strong growth in this area was
due to a 91.0% increase in the number of wide band clients, which as of December
31, 2004 reached 25,401. Likewise, revenue from security and data services
experienced rapid growth in 2004, increasing by 34.6% and 14.9%, respectively.
Basic telephony services accounted for 51.0% of all revenues, followed by user
access charges (9.5%), long distance services (8.4%), public telephones (5.6%),
internet (11.5%) and other non-regulated services (14.0%), which include
security services, voice data, call center, telephone guides and equipment
sales, among others.
Operating profits remained steady at Ch$12,561 million (US$22.5 million),
varying by less than 1% from 2003. Selling, general and administrative expense
as a percentage of sales was 26.7%, compared to 27.0% in 2003. Telsur's cash
generating capacity remained strong in 2004 with EBITDA reaching Ch$25,577
million (US$45.9 million), almost unchanged from the Ch$25,639 million (US$46.0
million) reported in 2003. Free cash flow was mainly used to fund CAPEX and
dividends and debt service obligations.
Non-operating losses increased from Ch$2,867 million (US$5.1 million) in 2003 to
Ch$3,484 million (US$6.3 million) in 2004. Non-operating results were dragged
down by costs associated with a debt restructuring carried out in the latter
part of 2004 amounting to Ch$209 million (US$0.4 million). In addition, 2003
non-operating results included non-recurring income of Ch$532 million (US$1.0
million), which also explains the variation between the two periods.
Page 16 of 19
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Net profit in 2004 amounted to Ch$6,861 million (US$12.3 million), representing
a 9.9% decrease from the Ch$7,616 million (US$13.7 million) reported in 2003.
The decline in bottom line results for the year was attributable to the
aforementioned deterioration in non-operating results.
4Q 2004 Results
Telefonica del Sur's revenues reached Ch$13,597 million (US$24.4 million) up 1%
from the Ch$13,435 million (US$24.1 million) reported in the fourth quarter of
2003. The revenue mix varied however, favoring non-regulated services,
particularly Internet. A decline of 8.6%% in revenue associated with fixed
telephony, access charges, long distance and public telephony was entirely
offset by a 35.4% 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
continues to bolster its product base to rely on revenue generation from
non-regulated services.
Basic telephony services accounted for 45.3% of all revenues, followed by user
access charges (11.1%), long distance services (8.2%), public telephones (5.8%),
internet (12.9%) and other non-regulated services (16.7%), which include
security services and business services, among others.
Operating profits grew by 0.8% during the quarter reaching Ch$3,294 million
(US$5.9 million), in line with the growth in sales. SG&A expenses as a
percentage of sales remained constant at 26.7%.
Telsur reported non-operating losses of Ch$870 million (US$1.6 million),
compared to non-operating losses of Ch$348 million (US$0.6 million) reported in
4Q 2003. 4Q 2003 non-operating results included non-recurring income related to
an insurance settlement, which mostly explains the lower non-operating results
this quarter. Telsur reported net income of Ch$1,849 million (US$3.3 million), a
decrease of 17.8% compared to the fourth quarter of 2003, due to the
aforementioned reduction in non-operating results.
MANUFACTURING SECTOR
The following table details Quinenco's proportionate share of income (loss) from
investments in the Manufacturing sector during 2003 and 2004:
MANUFACTURING
-----------------------------------------------------------------------------------------------------------------------------------
Full Year Full Year Full Year
Ownership 4Q 2003 2003 3Q 2004 4Q 2004 4Q 2004 2004 2004
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$ MUS$
-----------------------------------------------------------------------------------------------------------------------------------
Madeco (1) 51.2% (6,351) (10,984) 1,563 397 0.7 4,615 8.3
-----------------------------------------------------------------------------------------------------------------------------------
MADECO
------------------------------------------------------------------------------------------------------
Quarter Full Year
------------------------------------------------------------------------------------------------------
4Q 2003 4Q 2004 4Q 2004 2003 2004 2004
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
------------------------------------------------------------------------------------------------------
Sales 55,024 74,512 133.7 243,608 324,035 581.3
Operating income (loss) 179 4,692 8.4 7,643 25,176 45.2
Net income (loss) (11,492) 778 1.4 (17,153) 8,512 15.3
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Total assets 362,518 342,910 615.2
Shareholders' equity 151,258 158,513 284.4
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Page 17 of 19
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QUINENCO S.A.
Enrique Foster Sur N(O) 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 Fourth Quarter 2004
--------------------------------------------------------------------------------
Full Year 2004 Results
Madeco's sales level rose by 33.0% to Ch$324,035 million (US$581.3 million) in
2004. The growth in sales during the year was mainly attributable to higher
average prices of cables and brass mill products, mainly related to the increase
in copper prices as well as higher volumes sold, which on a consolidated basis
grew by 12.7%.
Sales corresponding to the cable business unit were up by Ch$52,983 million
(US$95.1 million) or 46.8% to Ch$166,271 million (US$298.3 million) as a
consequence of strong demand for copper wire and copper and aluminum cables in
Madeco's main markets. Brass mill sales jumped during the period by 45.9% to
Ch$84,026 million (US$150.7 million) due to large volume increases in Chile and
Argentina, the effect of which was partially offset by lower coin blank sales.
Sales growth experienced by the flexible packaging unit also contributed to the
rise in consolidated sales, having grown by 5.5% to Ch$45,117 million (US$80.9
million), mainly as a result of higher exports and sales volumes in Chile. Sales
of the aluminum profiles unit fell by 4.5% due to lower average prices, the
effect of which was not offset by the higher volume sold during the year. Sales
of the cable business unit accounted for 51.3% of total sales, followed by brass
mills (25.9%), flexible packaging (13.9%) and aluminum profiles (8.9%).
The pronounced recovery in sales, gains in efficiency and a slight 0.4% decline
in SG&A expenses translated directly into significantly higher operating profits
for Madeco. The company's operating income increased from Ch$7,643 million
(US$13.7 million) to Ch$25,176 million (US$45.2 million), attributable to the
cable and brass mill business units. Operating profit by business unit can be
broken down as follows: cable (41.7%), brass mills (32.4%), flexible packaging
(12.7%) and aluminum profiles (13.2%).
The operating margin as a percentage of sales rose from 3.1% in 2003 to 7.8% in
2004. Likewise, the increase in EBITDA was significant, growing from Ch$18,992
million (US$34.1 million) in 2003 to Ch$35,961 million (US$64.5 million) in
2004.
Madeco reported non-operating losses of Ch$14,301 million (US$25.7 million),
down by 36.8% from the Ch$22,628 million (US$40.6 million) reported in 2003,
mostly explained by lower non-operating expenses, which in 2003 included asset
write-offs and provisions for the liquidation of Optel in Brazil. In addition, a
13.9% reduction in interest expense and the absence of exchange rate losses due
to the appreciation of the Chilean peso also served to reduce non-operating
losses for the period.
Madeco's improved performance, both at the operating and non-operating level
served to totally revert 2003's net loss of Ch$17,153 million (US$30.8 million).
Madeco reported net income of Ch$8,512 million (US$15.3 million) in 2004. Worth
highlighting is that 2004 is the first year since 1999 that Madeco has reported
a positive bottom line.
4Q 2004 Results
Madeco's sales in the fourth quarter of 2004 increased by Ch$19,488 million
(US$35.0 million) or 35.4% from Ch$55,024 million (US$98.7 million) to Ch$74,512
million (US$133.7 million), primarily attributable to higher sales of the wire
and cable and brass mill business units, which rose by 52.8% and 37.9%,
respectively. Wire and cable sales, which accounted for Ch$12,777 million
(US$22.9 million) of the total increase, benefited from strong demand and higher
average prices in its four principal markets, particularly Chile and Brazil.
Higher average prices and volumes boosted brass mill sales by Ch$5,177 million
(US$9.3 million). The increase in wire and cable and brass mill sales from
foreign subsidiaries was partially offset by currency translations to Chilean
pesos due to the 8.5% revaluation experienced vis-a-vis the close of the fourth
quarter of 2003.
Page 18 of 19
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QUINENCO S.A.
Enrique Foster Sur N(O) 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 Fourth Quarter 2004
--------------------------------------------------------------------------------
In general terms, the more favorable economic climate in Madeco's main markets,
which stimulated investment, particularly in the construction sector in Chile,
contributed to sales growth during the fourth quarter.
Sales of the wire and cable business unit (whose principal operation is Ficap
Brazil) accounted for 49.6% of total sales, followed by brass mills (25.3%),
flexible packaging (14.9%) and aluminum profiles (10.2%).
Sales outpaced the increase in cost of goods sold, resulting in a 72.3% increase
in Madeco's gross income. This, coupled with a 7.1% decline in SG&A expenses
served to boost operating income by Ch$4,513 million (US$8.1 million) to
Ch$4,692 million (US$8.4 million). The improved operating performance was
attributable to strong increases in the operating income of the wire & cable and
brass mills business units. The company's operating margin as a percentage of
sales was 6.3% versus nil one year ago. Likewise, EBITDA experienced important
growth in 4Q 2004, reaching Ch$6,962 million (US$12.5 million) versus Ch$2,410
million (US$4.3 million) in the same quarter of 2003.
Non-operating losses amounted to Ch$3,713 million (US$6.7 million) versus
Ch$10,354 million (US$18.6 million) in 4Q 2003. The reduction in non-operating
losses was primarily due lower other non-operating expenses, which in the fourth
quarter of 2003 included asset write-offs and provisions for the liquidation of
Optel in Brazil. In 4Q 2004, non-operating losses were mainly composed of
interest expense of Ch$3,306 million (US$5.9 million) of which Ch$1,260 million
(US$2.3 million) was related to a charge to results for the amortization of
goodwill associated with Madeco's Series A bonds, which were prepaid in the last
quarter of the year.
Madeco reported net profit of Ch$778 million (US$1.4 million) for the fourth
quarter of 2004, a dramatic improvement from the net loss of Ch$11,492 million
(US$20.6 million) in 4Q 2003, attributable to the aforementioned improvements in
Madeco's operating and non-operating performance during the quarter.
#
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 19 of 19
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QUINENCO S.A.
Enrique Foster Sur N(O) 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: March 16, 2005