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 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 second quarter 2005 consolidated results
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.com Second Quarter 2005
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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 CONSOLIDATED RESULTS
FOR THE SECOND QUARTER OF 2005
(Santiago, Chile, August 12, 2005) 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, 2005.
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 (2.7% year-over-year). Figures in US$ have been
converted from Chilean pesos (Ch$) at the observed exchange rate on June 30,
2005 (Ch$579.00 = US$1.00) and are only provided for the reader's convenience.
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2Q 2005 HIGHLIGHTS
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- Consolidated sales rose by 9.0% in 2Q 2005 to Ch$112,173 million (US$193.7
million), mainly attributable to an 11.0% growth in Madeco's revenues.
- Operating income fell by 5.7% to Ch$8,343 million (US$14.4 million) mainly
due to increased raw material costs and higher SG&A expenses at Madeco.
- Results from equity method investments reflected continued growth of CCU
and Banco de Chile. Income from equity method investments increased by
15.8% to Ch$16,803 million (US$29.0 million).
- Non-operating income reached Ch$3,218 million (US$5.6 million) compared to
non-operating losses of Ch$421 million (US$0.7 million) in 2Q 2004.
- Net income amounted to Ch$9,271 million (US$16.0 million) in 2Q 2005, an
increase of 38.4% from the Ch$6,699 million (US$11.6 million) reported in
2Q 2004 as a consequence of the improvement in operating and non-operating
results. YTD net earnings amounted to Ch$38,911 million (US$67.2 million),
far surpassing the Ch$15,455 million (US$26.7 million) reported for the
six months ended June 30, 2004.
- Earnings per share amounted to Ch$8.59 (US$0.01) and earnings per ADR to
Ch$85.86 (US$0.15) for the second quarter of 2005.
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Page 1 of 12
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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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GROUP HIGHLIGHTS - SECOND QUARTER 2005 AND SUBSEQUENT EVENTS
Banco de Chile
Banco de Chile completed the offering of 2.5% of its shares on the Santiago
Stock Exchange on August 2, 2005. 1,701,994,590 shares or 100% of the shares it
had repurchased in accordance with its Share Repurchase Program were sold for
Ch$34.5 per share, raising approximately US$104.7 million for the bank. Purchase
orders amounted to US$1,971 million, far exceeding available shares. The
proceeds will be used as working capital to finance the bank's expected growth
in the retail and small business segments. Quinenco's voting and dividend
interest in Banco de Chile following the share offering is 52.15% and 29.15%,
respectively.
CCU
During the month of July 2005, IRSA, the holding company which has a controlling
interest in CCU, increased its stake in CCU by approximately 2.5%. At present,
IRSA, which is jointly controlled by Quinenco and Heineken, has a 64.17%
interest in CCU.
Madeco
On August 8, 2005, Madeco announced that its Board of Directors had decided to
convene an Extraordinary Shareholders' Meeting for September 2, 2005 in order to
submit for approval to shareholders a capital increase of approximately
Ch$52,000 million. If approved, the funds raised in the capital increase will be
used to provide Madeco with additional working capital, reduce debt obligations
and finance new industrial investments.
On April 4, 2005, Madeco announced that it had reached an agreement with Corning
International Corporation regarding the Brazilian joint venture subsidiary,
Optel Ltda. Corning agreed to sell Madeco its 50% share in Optel for the nominal
amount of R$1 (one Brazilian Real). Optel Ltda. is an optical fiber cable
producer with installations in Brazil and Argentina.
Cencosud
As of June 30, 2005, Quinenco held 22,603,996 shares of Cencosud, equivalent to
1.23% of Cencosud's 1,841,883,645 outstanding shares. During the second quarter
of 2005, Quinenco sold 19,322,760 shares of the 41,926,756 shares it received in
exchange for its interest in Alamacenes Paris in March 2005, in accordance with
the terms and conditions of Cencosud's tender offer.
Investment in Entel
On June 9, 2005, Quinenco received an extraordinary dividend corresponding to
its 5.7% interest in Entel of Ch$10,364 million.
Hoteles Carrera
On June 29, 2005, Hoteles Carrera sold its remaining hotel in Concepcion, the
Araucano, to local investors for Ch$2,826 million (UF161,000). For the period
ended June 30,2005, Hoteles Carrera made a loss provision of Ch$1,016 million in
connection with the disposal.
Quinenco
At the General Ordinary Shareholders' Meeting held on April 28, 2005,
shareholders approved a dividend distribution corresponding to 2004 net income
of Ch$12.97685 per share, payable to shareholders registered with the company as
of May 5, 2005. The total amount of the dividend was Ch$14,012 million,
equivalent to 60% of 2004 net income. At the same meeting, the entire Board of
Directors was reelected. Immediately following the General Ordinary
Shareholders' Meeting, an Extraordinary Board of Directors' meeting was held,
and Guillermo Luksic Craig and Andronico Luksic Craig were elected Chairman and
Vice-Chairman, respectively.
Page 2 of 12
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QUINENCO S.A.
Enrique Foster Sur N(0) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
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Net Income Contribution
------------------------------------------------------------------------------------------------------------------------------
Quinenco's
ownership % 2Q 2004 1Q 2005 2Q 2005 2Q 2005 YTD 2004 YTD 2005
Sector/Company at 6/30/2005 MCh$ MCh$ MCh$ MUS$ MCh$ MCh$
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Financial Services:
Banco de Chile (1)(3) 53.5% 13,820 12,462 15,397 26.6 25,314 27,859
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Food & Beverage:
CCU (4) 30.8% (18) 5,967 304 0.5 5,207 6,272
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Telecommunications:
Telsur (1) 73.7% 1,263 1,313 1,363 2.3 2,511 2,676
Entel (2) 5.7% 727 1,103 894 1.5 1,568 1,996
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Manufacturing:
Madeco (1) 51.2% 1,712 1,997 2,303 4.0 2,684 4,300
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Other operating companies (5) (2,021) (538) (1,743) (3.0) (1,680) (2,280)
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Total operating companies 15,483 22,304 18,518 32.0 35,604 40,823
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Quinenco & holding companies (8,784) 7,336 (9,247) (16.0) (20,149) (1,912)
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Total 6,699 29,640 9,271 16.0 15,455 38,911
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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) 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).
(5) Other operating companies include results from Habitaria, Indalsa, Hoteles
Carrera.
Net Income - 2Q 2005
Quinenco reported net income for the second quarter of 2005 which amounted to
Ch$9,271 million (US$16.0 million), compared to net income of Ch$6,699 million
(US$11.6 million) in the second quarter of 2004. The net income contribution
from operating companies reached Ch$18,518 million (US$32.0 million), up by
19.6% compared to the same quarter in 2004. The marked increase was attributable
to higher results from all of Quinenco main operating companies which benefited
from strong growth under the favorable economic conditions seen during the
second quarter. The increase in quarterly net income was partially offset by an
increase of Ch$463 million (US$0.8 million) in the loss attributable to the
Quinenco corporate level, mostly associated with a higher level of interest
expense.
Earnings per ordinary share amounted to Ch$8.59 (US$0.01) and earnings per ADR,
Ch$85.86 (US$0.15).
Page 3 of 12
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QUINENCO S.A.
Enrique Foster Sur N(0) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
================================================================================
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Consolidated Income Statement Breakdown
-----------------------------------------------------------------------------------------------------------------------
2Q 2004 1Q 2005 2Q 2005 2Q 2005 YTD 2004 YTD 2005
MCh$ MCh$ MCh$ MUS$ MCh$ MCh$
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Revenues
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Madeco 88,617 88,294 98,342 169.8 165,470 186,636
Telsur 13,201 13,127 13,367 23.1 26,262 26,494
Quinenco & holding 1,056 617 464 0.8 3,861 1,081
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Total 102,874 102,038 112,173 193.7 195,593 214,211
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Operating income (loss)
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Madeco 8,320 7,426 7,437 12.8 14,476 14,863
Telsur 3,106 2,941 3,185 5.5 6,059 6,126
Quinenco & holding (2,583) (2,674) (2,279) (3.9) (4,755) (4,953)
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Total 8,843 7,693 8,343 14.4 15,780 16,036
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Non-operating income (loss)
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Interest income 560 629 767 1.3 1,137 1,396
Share of net income/loss from related co:
Banco de Chile 13,820 12,462 15,397 26.6 25,314 27,859
CCU (17) 5,968 304 0.5 5,207 6,272
Entel 727 1,103 894 1.5 1,568 1,996
Other equity investments (16) (59) 208 0.4 (310) 151
Other non-op income 3,663 24,392 851 1.5 5,327 25,243
Amortization of GW expense (5,244) (5,207) (5,532) (9.6) (10,516) (10,739)
Interest expense (6,730) (7,139) (7,000) (12.1) (15,568) (14,139)
Other non-op expenses (5,341) (2,191) (2,923) (5.0) (6,784) (5,114)
Price-level restatement (651) (95) (1,108) (1.9) 626 (1,203)
Foreign exchange gains & losses (1,192) (79) 1,361 2.4 (1,720) 1,282
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Total (421) 29,784 3,219 5.6 4,281 33,004
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Income Tax (202) (5,589) (146) (0.3) (2,022) (5,735)
Extraordinary items -- -- -- -- -- --
Minority Interest (2,047) (2,551) (2,884) (5.0) (3,595) (5,435)
Amortization of negative GW 526 303 739 1.3 1,011 1,041
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Net income (loss) 6,699 29,640 9,271 16.0 15,455 38,911
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Revenues - 2Q 2005
Consolidated revenues for the second quarter of 2005 were Ch$112,173 million
(US$193.7 million), up by 9.0% from the Ch$102,874 million (US$177.7 million)
reported in the second quarter of 2004, explained by a 11.0% increase in
Madeco's sales as a result of sustained demand for copper rod and copper and
aluminum cables in all of its main markets. Consolidated sales can be broken
down as follows: Madeco (87.7%), Telefonica del Sur (11.9%) and others (0.4%).
Operating Income - 2Q 2005
Operating income for the second quarter of 2005 was Ch$8,343 million (US$14.4
million), down by 5.7% from the Ch$8,843 million (US$15.3 million) reported in
the second quarter of 2004. The decline in consolidated operating income was
attributable to Madeco's operations, which were affected by weak performance
attributable to the brass mills and flexible packaging business units.
EBITDA - 2Q 2005
EBITDA reached Ch$14,818 million (US$25.6 million) in 2Q 2005, compared to
Ch$15,499 million (US$26.8 million) in 2Q 2004, a decrease of 4.4% compared to
the same period of 2004.
Page 4 of 12
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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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Non-Operating Results -2Q 2005
Quinenco reported non-operating income of Ch$3,218 million (US$5.6 million) in
the second quarter of 2005, compared to a non-operating loss of Ch$421 million
(US$0.7 million) in the same quarter of 2004. The variation between the two
periods is mostly explained by an increase in Quinenco's proportionate share of
Banco de Chile's net income, a reduction in other non-operating expenses and
better foreign exchange results, the effects of which were partially offset by a
decline in other non-operating income. 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) reached Ch$16,803 million (US$29.0 million), compared to Ch$14,514 million
(US$25.1 million) in 2Q 2004, an increase of 15.8%. The increase mainly
corresponded to growth in the proportionate share of net income from Banco de
Chile (+Ch$1,577 million or US$2.7 million).
Other non-operating income
Other non-operating income was Ch$851 million (US$1.5 million), compared to
Ch$3,663 million (US$6.3 million) in the second quarter of 2004. Other
non-operating income in 2Q 2005 was mainly composed of dividends received from
the investment in Cencosud, gain on the sale of fixed assets and rental income.
Amortization of goodwill expense
Amortization of goodwill expense amounted to Ch$5,532 million (US$9.6 million)
in the second quarter of 2005, compared to Ch$5,244 million (US$9.1 million)
reported in the same period of 2004. 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$297,323 million
(US$513.5 million) as of June 30, 2005, Ch$280,562 million (US$484.6 million)
was associated with the acquisition of the banks. Goodwill is amortized using
the straight-line method over twenty years.
Interest Expense
Interest expense for the second quarter of 2005 amounted to Ch$7,000 million
(US$12.1 million), an increase of 4.0% compared to the same period in 2004. The
increase corresponds to higher interest expense at the corporate level as a
result of the higher fixed interest rate associated with outstanding bonds at
LQIF. The increase in interest expense during 2Q 2005 was partially offset by
lower interest expense at Madeco due to a reduction in its level of
indebtedness, lower interest rates and the effect of the appreciation of the
Chilean peso on US dollar denominated debt.
Other non-operating expenses
Other non-operating expenses amounted to Ch$2,923 million (US$5.0 million)
compared to Ch$5,341 million (US$9.2 million) in the second quarter of 2004.
Other non-operating expenses are mostly composed of a loss on the sale of the
Hotel Araucano in Concepcion of Ch$1,016 million (US$1.8 million), asset
write-downs and expenses associated to Lucchetti Peru.
Price-level restatement and foreign currency translation results
Price-level restatement and foreign currency translation results amounted to a
net gain of Ch$253 million (US$0.4 million) in the second quarter of 2005,
compared to a net loss of Ch$1,842 million (US$3.2 million) in the same period
in 2004. In 2Q 2005, the gain specific to foreign currency differences amounted
to Ch$1,361 million (US$2.4 million), compared to a loss of Ch$1,192 million
(US$2.1 million) reported in the second quarter of 2004, primarily attributable
to Madeco's operations as a result of the revaluation of the Brazilian real
Page 5 of 12
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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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vis-a-vis the US dollar during the quarter. Price-level restatement losses
amounted to Ch$1,108 million (US$1.9 million), compared to losses of Ch$651
million (US$1.1 million) in 2Q 2004.
Income Taxes - 2Q 2005
Quinenco reported income tax expense of Ch$146 million (US$0.3 million), an
amount comparable to the Ch$202 million (US$0.3 million) in the same period of
2004.
Minority Interest - 2Q 2005
In the second quarter of 2005, Quinenco reported a deduction from income of
Ch$2,884 million (US$5.0 million), compared to a deduction from income of
Ch$2,047 million (US$3.5 million) in 2Q 2004. The amount is mainly related to
minority shareholders' proportionate share of Madeco's and Telefonica del Sur's
second quarter 2005 income.
CONSOLIDATED BALANCE SHEET ANALYSIS (vis-a-vis the 1st quarter of 2005)
Condensed Consolidated Balance Sheet
---------------------------------------------------------------------------------------------------------------
As of As of As of As of
6/30/04 3/31/05 6/30/05 6/30/05
MCh$ MCh$ MCh$ MUS$
---------------------------------------------------------------------------------------------------------------
Current assets 236,924 281,735 293,777 507.4
Fixed assets 299,251 281,641 272,746 471.1
Other assets 804,026 818,075 794,942 1,372.9
---------------------------------------------------------------------------------------------------------------
Total assets 1,340,201 1,381,451 1,361,465 2,351.4
---------------------------------------------------------------------------------------------------------------
Current liabilities 210,187 127,256 124,558 215.1
Long-term liabilities 374,710 462,938 451,615 780.0
Minority interest 106,883 115,131 115,315 199.2
Shareholders' equity 648,421 676,126 669,977 1,157.1
---------------------------------------------------------------------------------------------------------------
Total liabilities & shareholders' equity 1,340,201 1,381,451 1,361,465 2,351.4
---------------------------------------------------------------------------------------------------------------
Current Assets
Current assets increased 4.3% compared to the first quarter of 2005, mainly due
to an increase in cash and cash equivalents held at the corporate level and an
increase in accounts receivables at Madeco.
Fixed Assets and Other Assets
Fixed assets and other assets decreased by 3.2% and 2.8%, respectively. Fixed
assets decreased mainly due to the disposal of the Hotel Araucano in Concepcion
and a reduction in fixed assets at Madeco attributable to the effect of the
appreciation of the Chilean peso on US dollar denominated assets. The reduction
in other assets was primarily due to the partial disposal of Cencosud shares and
a reduction in the value of the Company's investment in Entel following the
receipt of an extraordinary dividend.
Current Liabilities
Current liabilities decreased by 2.1% compared to the first quarter of 2005,
primarily due to a reduction in bank obligations at the corporate level,
partially offset by an increase in accounts and notes payable at Madeco.
Long-term Liabilities
Long-term liabilities declined by 2.4% compared to the first quarter of 2005,
mainly attributable to a reduction in bonds payable at Quinenco and to a lesser
extent, Madeco.
Page 6 of 12
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Phone (56-2) 750-7100
Fax # (56-2) 750-7101
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Minority Interest
Minority interest did not vary significantly compared to the first quarter of
2005.
Equity
Shareholders' equity did not vary significantly compared to the first quarter of
2005.
Quinenco Corporate Level Debt and Cash
As of June 30, 2005, financial debt at the corporate level was Ch$329,270
million (US$568.7 million). As of the same date, cash and cash equivalents
amounted to Ch$87,306 million (US$150.8 million). The debt to total
capitalization ratio at the corporate level was 32.9%.
NAV
As of June 30, 2005, the estimated net asset value (NAV) of Quinenco was
US$1.937 billion (Ch$1,038 per share) and market capitalization was US$1.253.2
million (Ch$672 per share). The discount to NAV is estimated at 35% as of the
same date.
[GRAPHIC OMITTED]
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SECTOR /OPERATING COMPANY ANALYSIS
FINANCIAL SERVICES SECTOR
The following table details Quinenco's proportionate share of income from
investments in the Financial Services sector during 2004 and 2005:
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FINANCIAL SERVICES
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Ownership 2Q 2004 YTD 2004 1Q 2005 2Q 2005 2Q 2005 YTD 2005
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$
---------------------------------------------------------------------------------------------------------------
Banco de Chile (1) 53.5% 13,820 25,314 12,462 15,397 26.6 27,859
---------------------------------------------------------------------------------------------------------------
1) Ownership % in the above table corresponds to voting rights in Banco de
Chile.
BANCO DE CHILE
--------------------------------------------------------------------------------------------------------------
Quarter Accumulated for Year
--------------------------------------------------------------------------------------------------------------
2Q 2004 2Q 2005 2Q 2005 YTD 2004 YTD 2005 YTD 2005
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
--------------------------------------------------------------------------------------------------------------
Operating revenues 124,973 135,996 234.9 234,346 245,441 423.9
Provision for loan losses (19,151) (10,903) (18.8) (34,012) (24,402) (42.1)
Operating expenses (57,037) (68,804) (118.8) (113,960) (129,832) (224.2)
Net Income (loss) 45,687 52,258 90.3 84,605 93,097 160.8
--------------------------------------------------------------------------------------------------------------
Loan portfolio 6,723,115 7,498,366 12,950.5
Total assets 9,824,801 10,544,864 18,212.2
Shareholders' equity 615,551 619,600 1,070.1
--------------------------------------------------------------------------------------------------------------
Net interest margin 4.6% 4.2%
Net Financial Margin 4.3% 4.2%
Efficiency ratio 45.6% 50.6%
ROAE 29.5% 35.3%
ROAA 1.8% 2.0%
-------------------------------------------------------
2Q 2005 Results
Banco de Chile's operating revenues increased by 8.8% to Ch$135,996 million
(US$234.9 million) in the second quarter of 2005. The increase in operating
revenues was mainly due to a 14.4% jump in the amount of fee income earned
during the second quarter of the year, a 3.4% increase in net financial income
and a 321.1% increase in gains (net) on sales of financial instruments.
Fee income, which reached Ch$33,751 million (US$58.3 million), equivalent to
24.8% of total operating revenues, increased as a result of higher fee income
associated with banking services (an increase of 11.7%) as well as subsidiary
non-banking services (an increase of 18.5%), particularly fund management and
stock brokerage and insurance services. Operating revenues were also boosted by
higher net financial income which rose from Ch$94,351 million (US$163.0 million)
in 2Q 2004 to Ch$97,571 million (US$168.5 million) in 2Q 2005. Net financial
income, which is calculated as the sum of net interest revenue and foreign
exchange transactions (net), comprised 71.7% of operating revenues in 2Q 2005.
The increase in net financial income was primarily due to a 4.8% growth in
average interest earning assets and higher inflation experienced during the
period, the effect of which was partially offset by negative repricing benefits
associated with increases in short-term interest rates and lower spreads, mainly
related to the corporate banking area. The increase in operating revenues
experienced during the quarter was also attributable to a Ch$3,564 million
(US$6.2 million) increase in gains on the sale of financial instruments (net)
which rose from Ch$1,110 million (US$1.9 million to Ch$4,674 million (US$8.1
million), mainly explained by higher earnings associated with investment
securities held by the stock brokerage.
Page 8 of 12
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Provisions, which amounted to Ch$10,903 million (US$18.8 million), showed a
marked decrease from the Ch$19,151 million (US$33.1 million) reported in the
second quarter of 2004. The level of 2Q 2005 loan loss provisions generally
reflect an improvement in the quality of the bank's loan portfolio in the
context of an expansive and favorable economic scenario.
Other income and expenses amounted to Ch$8,008 million (US$13.8 million), an
increase of 24.8% over the Ch$6,418 million (US$11.1 million) reported in 2Q
2004. Other income and expenses was mainly composed of loan recoveries
(previously written off) of Ch$9,176 million (US$15.8 million), partially offset
by other non-operating expenses of Ch$3,534 million (US$6.1 million).
Operating expenses increased by 20.6% to Ch$68,804 million (US$118.8 million)
compared to the second quarter of 2004, primarily due to higher severance
expense related to personnel restructurings in preparation for the incorporation
of the bank's new technology platform and advisory fees associated with the
bank's New York branch.
Price-level restatement losses totaled Ch$5,955 million (US$10.3 million)
compared to price-level restatement losses of Ch$4,627 million (US$8.0 million)
reported in 2Q 2004. The losses in 2Q 2005 reflect the higher inflation
experienced during the period (1.8% adjustment).
Net income increased by 14.4% to Ch$52,258 million (US$90.3 million) in 2Q 2005,
marking a new level of quarterly earnings achieved by the bank. The increase in
net earnings reflect the continuing expansion at the operating level,
particularly with respect to fee income as well as lower loan loss provisions
and higher recovery of previously written-off loans associated with favorable
economic conditions and a high quality loan portfolio.
As of June 2005, the Bank's loan portfolio (net of interbank loans) had grown by
11.5% to Ch$7,498,366 million (US$12.9 billion) over the last twelve month
period, mostly related to increases in commercial loans, other outstanding
loans, consumer loans and contingent loans.
Banco de Chile is the second ranked bank in the country with a market share of
17.8% according to information published by the Chilean Superintendency of Banks
for the period ended June 30, 2005. Its return on capital and reserves after
taxes (annualized) reached 35.4%, making it the most profitable bank in the
country for the same period. The Chilean financial system reported a return on
capital and reserves of 19.1%, according to the same source.
FOOD & BEVERAGE SECTOR
The following table details Quinenco's proportionate share of income (loss) from
investments in the Food & Beverage sector during 2004 and 2005:
--------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE
--------------------------------------------------------------------------------------------------------------
Ownership 2Q 2004 YTD 2004 1Q 2005 2Q 2005 2Q 2005 YTD 2005
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$
--------------------------------------------------------------------------------------------------------------
CCU 30.8% (18) 5,207 5,967 304 0.5 6,272
--------------------------------------------------------------------------------------------------------------
Page 9 of 12
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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 2005
================================================================================
CCU
--------------------------------------------------------------------------------------------------------------
Quarter Accumulated for Year
--------------------------------------------------------------------------------------------------------------
2Q 2004 2Q 2005 2Q 2005 YTD 2004 YTD 2005 YTD 2005
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
--------------------------------------------------------------------------------------------------------------
Sales 86,247 98,715 170.5 200,991 225,448 389.4
Operating income (loss) 4,053 4,840 8.4 28,203 29,982 51.8
Net Income (loss) (56) 988 1.7 16,904 20,356 35.2
--------------------------------------------------------------------------------------------------------------
Total Assets 577,461 612,460 1,057.8
Shareholders' equity 291,952 305,623 527.8
--------------------------------------------------------------------------------------------------------------
2Q 2005 Results
CCU's sales in the second quarter of 2005 grew by 14.5% compared to the second
quarter of 2004, 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 (+12.0%), the Chilean beer segment (+10.7%), the pisco
segment (+253.2%), the Argentine beer segment (+8.4%) and the Argentine wine
segment (27.7%). These volumes increases were partially offset by lower sales
volumes of the Chilean domestic and export wine segment (-7.8%). Higher average
prices were mostly attributable to the Chilean beer, pisco and wine segments
(increases of 0.4%,17.2% and 3.9%, respectively).
The increase in sales translated directly into an improvement of 19.4% in CCU's
operating income for the period which reached Ch$4,840 million (US$8.4 million).
The increase in operating income was partially offset by a 10.9% increase in
SG&A expense associated with the pisco, Chilean beer and soft drinks segments.
The consolidated operating margin, which reflects the seasonality of CCU's
business in the winter months, reached 4.9% of sales, compared to 4.7% in the
same period of 2004.
CCU reported non-operating losses of Ch$2,950 million (US$5.1 million) compared
to non-operating losses of Ch$3,178 million (US$5.5 million) in 2Q 2004. The
improvement in non-operating results was primarily attributable to a reduction
in foreign exchange losses due to the appreciation of the Chilean peso and to
lower other non-operating losses (net), attributable to gains on the sale of
fixed assets. The improvement in non-operating results was partially offset by
an increase in interest expense (related to the pisco business segment) and a
reduction in price-level restatement gains.
Net results improved from a loss of Ch$56 million (US$0.1) in 2Q 2004 to net
income of Ch$988 million (US$1.7 million) in 2Q 2005. Quarterly results
benefited from the higher sales level achieved which led to a marked increase in
operating income as well as a reduction in non-operating losses and lower income
taxes.
TELECOMMUNICATIONS SECTOR
The following table details Quinenco's proportionate share of income from
investments in the Telecommunications sector during 2004 and 2005:
--------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS
--------------------------------------------------------------------------------------------------------
Ownership 2Q 2004 YTD 2004 1Q 2005 2Q 2005 2Q 2005 YTD 2005
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$
--------------------------------------------------------------------------------------------------------
Telsur 73.7% 1,263 2,511 1,313 1,363 2.4 2,676
Entel (1) 5.7% 727 1,568 1,103 894 1.5 1,996
--------------------------------------------------------------------------------------------------------
(1) Non-controlling interest
Page 10 of 12
================================================================================
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 2005
================================================================================
TELSUR
--------------------------------------------------------------------------------------------------------------
Quarter Accumulated for Year
--------------------------------------------------------------------------------------------------------------
2Q 2004 2Q 2005 2Q 2005 YTD 2004 YTD 2005 YTD 2005
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
--------------------------------------------------------------------------------------------------------------
Sales 13,201 13,367 23.1 26,261 26,494 45.8
Operating income (loss) 3,106 3,185 5.5 6,059 6,126 10.6
Net Income (loss) 1,715 1,850 3.2 3,410 3,632 6.3
--------------------------------------------------------------------------------------------------------------
Total Assets 133,976 133,978 231.4
Shareholders' equity 64,222 66,016 114.0
--------------------------------------------------------------------------------------------------------------
2Q 2005 Results
Telefonica del Sur's revenues reached Ch$13,367 million (US$23.1 million)
varying only slightly from the Ch$13,201 million (US$22.8 million) reported in
the second quarter of 2004. Nonetheless, the revenue mix continued to favor
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 entirely offset by a 31.3% 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 47.5% of all revenues, followed by other non-regulated
services (28.9%), user access charges (10.7%), long distance services (7.6%) and
public telephones (5.3%).
The higher sales level achieved during the period and a slight reduction in cost
of sales more than compensated for a 3.9% increase in SG&A expenses. This
translated into a 2.5% improvement in the level of operating profit reported
during the quarter.
Telsur reported non-operating losses of Ch$763 million (US$1.3 million), down by
11.0% from the non-operating losses of Ch$858 million (US$1.5 million) reported
in 2Q 2004. The improvement in non-operating results was primarily attributable
to a reduction in interest expense as a result of a lighter debt load.
Telsur reported net income of Ch$1,850 million (US$3.2 million), an increase of
7.8% compared to the second quarter of 2004, mainly as a result of the
aforementioned improvement in operating and non-operating results.
MANUFACTURING SECTOR
The following table details Quinenco's proportionate share of income (loss) from
investments in the Manufacturing sector during 2004 and 2005:
--------------------------------------------------------------------------------------------------------
MANUFACTURING
--------------------------------------------------------------------------------------------------------
Ownership 2Q 2004 YTD 2004 1Q 2005 2Q 2005 2Q 2005 YTD 2005
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$
--------------------------------------------------------------------------------------------------------
Madeco 51.2% 1,712 2,684 1,997 2,303 4.0 4,300
--------------------------------------------------------------------------------------------------------
Page 11 of 12
================================================================================
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 2005
================================================================================
MADECO
-----------------------------------------------------------------------------------------------------------
Quarter Accumulated for Year
-----------------------------------------------------------------------------------------------------------
2Q 2004 2Q 2005 2Q 2005 YTD 2004 YTD 2005 YTD 2005
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
-----------------------------------------------------------------------------------------------------------
Sales 88,617 98,342 169.8 165,470 186,636 322.3
Operating income (loss) 8,320 7,437 12.8 14,476 14,863 25.7
Net Income (loss) 3,099 4,495 7.8 4,860 8,392 14.5
-----------------------------------------------------------------------------------------------------------
Total assets 365,040 366,398 632.8
Shareholders' equity 156,210 171,968 297.0
-----------------------------------------------------------------------------------------------------------
2Q 2005 Results
Madeco's sales in the second quarter of 2005 increased by Ch$9,725 million
(US$16.8 million) or 11.0% from Ch$88,617 million (US$153.1 million) to
Ch$98,342 million (US$169.8 million), attributable to higher sales of the wire
and cable business unit which rose by 24.2% compared to the same period of 2004.
Wire and cable sales benefited from strong demand for metallic cables and higher
average prices in its principal markets, particularly Brazil and Peru. The
increase in consolidated sales was partially offset by lower sales of the brass
mills, flexible packaging and aluminum profiles business units which fell by
5.0%, 4.0% and 2.7%, respectively.
Sales of the wire and cable business unit (whose principal operation is Ficap
Brazil) accounted for 59.8% of total sales, followed by brass mills (20.8%),
flexible packaging (11.8%) and aluminum profiles (7.6%).
In spite of the higher sales level, cost of sales increases, mainly raw material
costs, and an 11.3% increase in SG&A expenses led to a reduction of 10.6% in
operating income in the second quarter of the year. The reduction in operating
income mainly corresponded to the brass mills business unit which suffered from
competitive pressure from local producers and imports in Chile, as well as a
drop in exports. The 45.3% increase in operating income related to the wire and
cable unit partially offset the overall decline in operating income. Operating
income of the wire and cable business unit accounted for 74.1% of total
operating income, followed by brass mills (4.9%), flexible packaging (9.7%) and
aluminum profiles (11.3%). The operating margin fell to 7.6% of sales as a
consequence of the weakened performance (from 9.4% in 2Q 2004).
Non-operating losses amounted to Ch$2,152 million (US$3.7 million), down from
the Ch$5,806 million (US$10.0 million) reported in 2Q 2004. The decline in
non-operating losses was mainly attributable to foreign currency translation
gains and lower interest expense. Foreign currency translation gains were mainly
the consequence of the effect of the appreciation of the Brazilian real
vis-a-vis the US dollar. The reduction in interest expense was due to the lower
debt load, more favorable interest rates and the effect of the revaluation of
the Chilean peso on US dollar denominated debt.
Madeco reported a net profit of Ch$4,495 million (US$7.8 million) for the second
quarter of 2005, compared to net income of Ch$3,099 million (US$5.4 million) in
2Q 2004. The increase in net quarterly earnings was attributable to the
aforementioned improvement in Madeco's non-operating performance during the
second 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.cl
Page 12 of 12
================================================================================
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 12, 2005