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 November 2004
QUINENCO S.A.
(Exact name of registrant as specified in charter)
QUINENCO, INC.
(Translation of registrant's name into English)
Quinenco S.A.
Enrique Foster Sur 20, 14th Floor
Santiago, Republic of Chile
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12(g)3-2(b) under the Securities Act of 1934
Yes |_| No |X|
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12(g)3-2(b): ______________
The following document is being filed with this 6-K report and is attached
hereto.
Press Release dated 9 November 2004 -Quinenco Announces Consolidated Results for
the Third Quarter of 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 CONSOLIDATED RESULTS
FOR THE THIRD QUARTER OF 2004
(Santiago, Chile, November 9, 2004) Quinenco S.A. (NYSE:LQ), a leading Chilean
business conglomerate, announced today its consolidated financial results in
Chilean GAAP, for the third quarter ended September 30, 2004.
Consolidated financial results are presented in accordance with Chilean GAAP.
All figures are presented in constant Chilean pesos and have been adjusted to
reflect the effects of inflation (1.6% year-over-year). Figures in US$ have been
converted from Chilean pesos (Ch$) at the observed exchange rate on September
30, 2004 (Ch$608.90 = US$1.00) and are only provided for the reader's
convenience.
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3Q 2004 HIGHLIGHTS
- Consolidated sales rose by 8.1% in 3Q 2004 to Ch$99,483 million (US$163.4
million), mainly attributable to Madeco's revenues, which experienced
growth of 39.7% quarter-over-quarter.
- Operating income benefited from the improvement in Madeco's quarterly
performance, increasing by 133.9% to Ch$6,618 million (US$10.9 million).
- Results from equity method investments reflected continued growth of Banco
de Chile and CCU. Income from equity method investments increased to
Ch$13,264 million (US$21.8 million).
- Non-operating income amounted to Ch$383 million (US$0.6 million) in 3Q
2004, totally reverting the non-operating losses of Ch$18,197 million
(US$29.9 million) reported in 3Q 2003.
- Net income amounted to Ch$5,939 million (US$9.8 million) in the third
quarter of 2004, up by Ch$5,822 million (US$9.6 million) from the Ch$117
million (US$0.2 million) reported in the third quarter of last year. Net
income reflects the strong operational and non-operational gains achieved
in the third quarter of the year.
- Earnings per share amounted to Ch$5.50 (US$0.01) and earnings per ADR to
Ch$55.00 (US$0.09) for the third quarter of 2004.
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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 - THIRD QUARTER 2004 AND SUBSEQUENT EVENTS
Quinenco Holds Extraordinary Shareholders' Meeting 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.
Since this required a modification of the company's by-laws, in order to
facilitate the change, the Board of Directors as a whole resigned their
respective positions at the extraordinary shareholders' meeting and a new Board
was reelected at that time. 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. On November 8, 2004, The Board designated Guillermo Luksic as Chairman
and Andronico Luksic as Vice-Chairman of the Board. The Directors' Committee
will be composed of three members, Guillermo Luksic, Gonzalo Menendez and Matko
Koljatic.
Quinenco Purchases of 11.41% of Almacenes Paris
On October 5, 2004, Quinenco acquired an 11.41% interest in Almacenes Paris, one
of Chile's largest retail department store chains. The shares were acquired for
Ch$514 per share, the total of which amounted to Ch$35,204 million (equivalent
to approximately US$58.3 million at the observed exchange rate on October 5,
2004 of $603.47= 1 US$).
Quinenco and its wholly-owned subsidiary, Inversiones Rio Azul S.A., acquired
100% of Nahuel S.A., direct owner of the 68,489,407 Almacenes Paris shares
purchased. The terms and conditions of the share purchase did not vary from
those originally reported on August 18, 2004. On the same date, Inversiones Rio
Azul S.A., Inmobiliaria Cerro Verde S.A., Lemoniz S.A. and Consorcio Financieros
S.A. entered into an agreement (Convenio de Cesion de Acciones), which grants
rights of first refusal, among other things, for future share acquisitions or
disposals of the shares now held.
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 bond issue,
which consisted of two series (Series A for UF4 million and Series B for UF3
million), was purchased by institutional investors, including local pension
funds, insurance companies, brokerage firms and mutual funds. Series A is a 5.5
year bond with a coupon rate of 3.25%. Series B is a 20.5 year bond with a
coupon rate of 4.75%. Both the Series A and Series B bonds were oversubscribed,
and the yield rate was 3.69% and 5.10%, respectively. The proceeds from the bond
issue will be used to refinance existing debt.
Madeco Raises an Additional US$9 million on the Santiago Stock Exchange
On July 1, 2004, Madeco sold 138,956,755 shares (at Ch$41 per share) on the
Santiago Stock Exchange, resulting in proceeds to Madeco of Ch$5,697 million
(equivalent to US$9.0 million on transaction date). The shares represented the
remaining unsubscribed and unpaid shares of the capital increase approved by
Madeco's Board of Directors in 2002. Madeco's total outstanding shares now
amount to 4,259,045,163 shares. Quinenco did not subscribe for additional shares
and as a result, its interest in Madeco was reduced from 55.2% to 53.4%.
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QUINENCO S.A.
Enrique Foster Sur N(0) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
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Net Income Contribution
-----------------------------------------------------------------------------------------------------------------------------------
Quinenco's
ownership % at 3Q 2003 2Q 2004 3Q 2004 3Q 2004 YTD 2003 YTD 2004
Sector/Company 9/30/2004 MCh$ MCh$ MCh$ MUS$ MCh$ MCh$
-----------------------------------------------------------------------------------------------------------------------------------
Financial Services:
Banco de Chile (1)(3) 53.5% 10,788 13,592 11,481 18.9 30,501 36,375
-----------------------------------------------------------------------------------------------------------------------------------
Food & Beverage:
CCU (4) 30.8% 1,299 (17) 1,607 2.6 11,287 6,727
Indalsa (Ex-Lucchetti) (1) 95.6% 93 (1,564) (800) (1.3) (735) (1,550)
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Telecommunications:
Telsur (1) 73.6% 1,435 1,243 1,199 2.0 3,926 3,669
Entel (2) 5.7% 823 715 21 -- 2,568 1,563
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Manufacturing:
Madeco (1) 53.4% (253) 1,683 1,553 2.6 (4,607) 4,192
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Other operating companies (3,465) (424) (83) (0.1) (4,013) (984)
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Total operating companies 10,720 15,228 14,978 24.6 38,927 49,992
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Quinenco & holding companies (10,603) (8,639) (9,039) (14.8) 2,202 (28,854)
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Total 117 6,589 5,939 9.8 41,129 21,138
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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 - 3Q 2004
Quinenco reported net income for the third quarter of 2004 which amounted to
Ch$5,939 million (US$9.8 million), compared to net income of Ch$117 million
(US$0.2 million) in the third quarter of 2003. Quarterly results benefited from
both an increase in the net income contribution from Quinenco's operating
companies and improved results at the Quinenco corporate level.
The net income contribution from operating companies reached Ch$14,978 million
(US$24.6 million), up by 39.7% compared to the third quarter of 2003. The
increase in the quarterly contribution from operating companies was driven by
Madeco, other operating companies (which in 3Q 2003 included a loss provision on
the sale of the Hotel Carrera Santiago establishment of Ch$3,549 million or
US$5.8 million) and to a lesser extent, Banco de Chile and CCU. These increases
were partially offset by lower quarterly profits associated with Quinenco's
interest in Indalsa, Telsur and Entel.
Earnings per ordinary share amounted to Ch$5.50 (US$0.01) and earnings per ADR,
Ch$55.00 (US$0.09).
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QUINENCO S.A.
Enrique Foster Sur N(0) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
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QUINENCO S.A.
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Consolidated Income Statement Breakdown
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3Q 2003 2Q 2004 3Q 2004 3Q 2004 YTD 2003 YTD 2004
MCh$ MCh$ MCh$ MUS$ MCh$ MCh$
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Revenues
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Madeco 61,063 87,153 85,304 140.1 187,459 248,035
Telsur 13,142 12,983 13,281 21.8 39,086 39,108
Indalsa (ex Lucchetti) 15,620 (3) (11) -- 46,383 1,089
Quinenco & holding 2,166 1,042 909 1.5 6,344 3,606
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Total 91,991 101,175 99,483 163.4 279,272 291,838
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Operating income (loss)
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Madeco 1,768 8,183 6,125 10.1 7,420 20,362
Telsur 3,141 3,055 3,254 5.3 9,302 9,212
Indalsa (ex Lucchetti) 815 (210) (198) (0.3) 2,127 (99)
Quinenco & holding (2,895) (2,330) (2,563) (4.2) (7,543) (7,338)
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Total 2,829 8,698 6,618 10.9 11,306 22,137
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Non-operating income (loss)
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Interest income 744 550 544 0.9 2,370 1,662
Share of net income/loss from related co:
Banco de Chile 10,788 13,592 11,481 18.8 30,501 36,375
CCU 1,299 (17) 1,607 2.6 11,287 6,727
Entel 823 715 21 -- 2,569 1,563
Other equity investments 237 (16) 155 0.3 (565) (148)
Other non-op income 689 3,602 246 0.4 38,247 5,485
Amortization of GW expense (5,148) (5,158) (5,140) (8.4) (15,624) (15,482)
Interest expense (9,911) (6,619) (5,824) (9.6) (29,633) (21,134)
Other non-op expenses (20,615) (5,252) (3,976) (6.5) (32,858) (10,648)
Price-level restatement 1,298 (640) (82) (0.1) 893 533
Foreign exchange gains & losses 1,600 (1,172) 1,351 2.2 1,818 (341)
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Total (18,196) (414) 383 (0.6) 9,005 4,592
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Income Tax (984) (198) 727 1.2 (2,614) (1,262)
Extraordinary items -- -- -- -- -- --
Minority Interest 124 (2,014) (2,073) (3.4) 27 (5,608)
Amortization of negative GW 16,344 517 284 0.5 23,405 1,279
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Net income (loss) 117 6,589 5,939 9.8 41,129 21,138
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Revenues - 3Q 2004
Consolidated revenues for the third quarter of 2004 were Ch$99,483 million
(US$163.4 million), up by 8.1% from the Ch$91,991 million (US$151.1 million)
reported in the third quarter of 2003. The increase in consolidated sales is
attributable to a 39.7% increase in sales at Madeco, partially offset by the
reduction in Indalsa's (ex Lucchetti) sales following the disposal of its
Chilean-based pasta, edible oil and soup operations in March 2004. 3Q 2004
consolidated sales can be broken down as follows: Madeco (85.7%), Telefonica del
Sur (13.4%), Indalsa (ex Lucchetti) (0.0%) and others (0.9%).
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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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Operating Income - 3Q 2004
Operating income for the third quarter of 2004 was Ch$6,618 million (US$10.9
million), up by 133.9% from the Ch$2,829 million (US$4.6 million) reported in
the third 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.
EBITDA - 3Q 2004
EBITDA reached Ch$11,950 million (US$19.6 million) in 3Q 2004, compared to
Ch$8,936 million (US$14.7 million) in 3Q 2003, an increase of 33.7% compared to
the same period of 2003.
Non-Operating Results - 3Q 2004
Quinenco reported non-operating income of Ch$383 million (US$0.6 million) in the
third quarter of 2004, compared to a non-operating loss of Ch$18,197 million
(US$29.9 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$13,264 million
(US$21.8 million), compared to Ch$13,147 million (US$21.6 million) in 3Q
2003, an increase of 1.0%. While Quinenco's proportionate share of net
income in Banco de Chile and CCU increased by Ch$1,001 million (US$1.6
million), its share of Entel's net income declined by Ch$802 million
(US$1.3 million), which served to partially offset the increase in results
from Banco de Chile and CCU for the third quarter.
Other non-operating income
Other non-operating income was Ch$246 million (US$0.4 million), compared
to Ch$689 million (US$1.1 million) in the third quarter of 2003. Other
non-operating income in 3Q 2004 was mainly composed of gains on the sales
of shares and other non-operating income.
Amortization of goodwill expense
Amortization of goodwill expense amounted to Ch$5,140 million (US$8.4
million) in the third quarter of 2004, almost unchanged from the Ch$5,148
million (US$8.5 million) reported in the same period of 2003. Goodwill
expense is almost entirely related to the Banco de Chile acquisition in
2001, and to a lesser extent, the Banco Edwards acquisition in 1999 (now
kept on the books as Bank of Chile).
Of the total balance of goodwill (net) at the consolidated level of
Ch$305,945 million (US$502.5 million) as of September 30, 2004, Ch$288,993
million (US$474.6 million) was associated with the Banco de Chile
acquisition. Goodwill is amortized using the straight-line method over
twenty years.
Interest Expense
Interest expense for the third quarter of 2004 amounted to Ch$5,824
million (US$9.6 million), a reduction of 41.2% compared to the same period
in 2003. The decrease is primarily associated with a lighter consolidated
debt load at the Quinenco corporate level, Madeco and Indalsa (ex
Lucchetti), and to a lesser extent, lower prevailing interest rates.
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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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Other non-operating expenses
Other non-operating expenses amounted to Ch$3,976 million (US$6.5 million)
compared to Ch$20,615 million (US$33.9 million) in the third quarter of
2003. The significant variation in other non-operating expenses is mainly
explained by non-operating expenses associated with the non-subscription
of additional shares of Madeco in August 2003 (Ch$15,560 million or
US$25.6 million). 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 extraordinary amortization of negative goodwill associated
with Quinenco's interest in Madeco's capital increase. See explanation
below - Amortization of Negative Goodwill.
Other non-operating expenses in 3Q 2004 are mostly composed of asset
write-downs, legal and other non-operating expenses.
Price-level restatement and foreign currency translation losses
Price-level restatement losses amounted to Ch$82 million (US$0.1 million)
in the third quarter of 2004, compared to gains of Ch$1,298 million
(US$2.1 million) in the same period in 2003. In 3Q 2004, price-level
restatement losses are mainly due to the increase in the inflation rate
used for adjustment purposes from 0.1% in 3Q 2003 to 1.0% in 3Q 2004.
Gains specific to foreign currency differences amounted to Ch$1,351
million (US$2.2 million), compared to gains on foreign currency
translation of Ch$1,600 million (US$2.6 million) reported in the third
quarter of 2003. Foreign currency differences are primarily attributable
to Madeco's Brazilian operations as a result of the revaluation of the
Chilean peso vis-a-vis the US dollar in the third quarter.
Income Taxes - 3Q 2004
Quinenco reported income tax credits of Ch$727 million (US$1.2 million),
compared to income tax expense of Ch$984 million (US$1.6 million) in the same
period of 2003. The variation in income taxes mainly corresponded to tax refunds
at the holding company level.
Minority Interest - 3Q 2004
In the third quarter of 2004, Quinenco reported a deduction from income of
Ch$2,073 million (US$3.4million), compared to a credit to income of Ch$124
million (US$0.2 million) in 3Q 2003. The amount is mainly related to minority
shareholders' proportionate share of Madeco's and Telefonica del Sur's third
quarter 2004 income.
Amortization of Negative Goodwill - 3Q 2004
Amortization of negative goodwill amounted to Ch$284 million (US$0.5 million),
compared to Ch$16,344 million (US$26.8 million) in the third quarter of 2003.
The variation between the two quarters is associated with the non-subscription
of additional shares of Madeco in August 2003 (Ch$15,560 million or US$25.6
million). Worth mentioning is that the effect of the non-subscription in 2003
was totally offset by a charge to income included with Other non-operating
expenses for the same amount. See explanation above - Other Non-operating
Expenses.
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QUINENCO S.A.
Enrique Foster Sur N(0) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
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CONSOLIDATED BALANCE SHEET ANALYSIS (vis-a-vis the 2nd quarter of 2004)
Condensed Consolidated Balance Sheet
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As of As of As of As of
9/30/03 6/30/04 9/30/04 9/30/04
MCh$ MCh$ MCh$ MUS$
----------------------------------------------------------------------------------------------------
Current assets 293,091 233,002 241,323 365.1
Fixed assets 373,247 294,298 284,069 429.8
Other assets 833,866 790,716 793,535 1,200.5
----------------------------------------------------------------------------------------------------
Total assets 1,500,204 1,318,016 1,318,927 1,995.4
----------------------------------------------------------------------------------------------------
Current liabilities 208,890 206,707 206,256 312.1
Long-term liabilities 504,480 368,508 366,238 554.1
Minority interest 112,275 105,114 108,365 163.9
Shareholders' equity 674,559 637,687 638,068 965.3
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Total liabilities & shareholders' equity 1,500,204 1,318,016 1,318,927 1,995.4
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Current Assets
Current assets increased 3.6% compared to the second quarter of 2004, mainly
associated with an increase in inventory and repurchase instruments (pactos de
recompra) at Madeco.
Fixed Assets and Other Assets
Fixed assets decreased by 3.5% compared to the second quarter of 2004, mainly
due to the effect of the revaluation of the Chilean peso vis-a-vis the US dollar
on Madeco's US dollar held assets.
Other assets did not vary significantly from the second quarter of 2004.
Current Liabilities
Current liabilities did not vary significantly from the second quarter of 2004.
Long-term Liabilities
Long-term liabilities did not vary significantly from the second quarter of
2004.
Minority Interest
Minority interest increased by 3.1% compared to the second quarter of 2004,
mostly attributable to minority interest in Madeco.
Equity
Shareholders' equity did not vary significantly from the second quarter of 2004.
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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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Quinenco Corporate Level Debt and Cash
As of September 30, 2004, financial debt at the corporate level was Ch$323,044
million (US$530.5 million). As of the same date, cash and cash equivalents
amounted to Ch$52,477 million (US$86.2 million). The debt to total
capitalization ratio at the corporate level was 33.5%.
NAV
As of September 30, 2004, the estimated net asset value (NAV) of Quinenco was
US$1.856 billion (Ch$1,047 per share) and market capitalization was US$1.223
billion (Ch$690 per share). The discount to NAV is estimated at 34% as of the
same date.
[PIE CHART OMITTED]
[LINE CHART OMITTED]
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QUINENCO S.A.
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Phone (56-2) 750-7100
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SECTOR /OPERATING COMPANY ANALYSIS
FINANCIAL SERVICES SECTOR
The following table details Quinenco's proportionate share of income from
investments in the Financial Services sector during 2003 and 2004:
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FINANCIAL SERVICES
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Ownership 3Q 2003 YTD 2003 2Q 2004 3Q 2004 3Q 2004 YTD 2004
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$
------------------------------------------------------------------------------------------------------------------
Banco de Chile (1) 53.5% 10,788 30,501 13,592 11,481 18.9 36,375
------------------------------------------------------------------------------------------------------------------
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
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Quarter Accumulated for Year
-------------------------------------------------------------------------------------------------------------------
3Q 2003 3Q 2004 3Q 2004 YTD 2003 YTD 2004 YTD 2004
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
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Operating revenues 103,867 120,279 197.5 320,228 348,465 572.3
Provision for loan losses (13,265) (19,479) (32.0) (43,990) (52,597) (86.4)
Operating expenses (55,085) (59,772) (98.2) (165,664) (170,455) (279.9)
Net Income (loss) 37,104 39,277 64.5 104,659 121,658 199.8
-------------------------------------------------------------------------------------------------------------------
Loan portfolio, net 6,065,473 6,482,928 10,647.0
Total assets 9,074,971 9,598,936 15,764.4
Shareholders' equity 681,789 643,018 1,056.0
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Net interest margin 2.5% 3.6%
Net Financial Margin 3.8% 4.1%
Efficiency ratio 53.0% 49.7%
ROAE 21.9% 24.9%
ROAA 1.6% 1.6%
--------------------------------------------------------
3Q 2004 Results
Operating revenues increased by 15.8% to Ch$120,279 million (US$197.5 million)
in the third quarter of 2004. The increase in operating revenues was mainly due
to a 33.8% rise in the amount of fee income earned during the third quarter of
the year and a 13.6% 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$33,726 million (US$55.4 million), equivalent to
28.0% of total operating revenues, increased as a result of higher fee income
associated with banking services (an increase of 43.4%) as well as subsidiary
non-banking services, particularly fund management (an increase of 20.1%).
Operating income was also boosted by higher net financial income which rose from
Ch$78,189 million (US$128.4 million) in 3Q 2003 to Ch$88,814 million (US$145.9
million) in 3Q 2004. Net financial income, which is calculated as the sum of net
interest revenue and foreign exchange transactions (net), comprised 73.8% of
operating revenues in 3Q 2004. The increase in net financial income was
primarily due to a 4.2% growth in average interest earning assets and an
increase in the net financial margin as a result of the higher inflation
experienced during the period, higher lending spreads, a better
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funding mix and the recovery of previously charged-off loans in the corporate
loan area. The increase in operating revenues experienced during the quarter was
partially offset by losses on the sale of financial instruments (net) which fell
by Ch$2,730 million (US$4.5 million) to Ch$2,261 million (US$3.7 million). The
variation between the two periods is explained by the sale of a retail sector
loan (the effect of which was offset by a release of provisions) and the sale of
Central Bank papers.
Provisions, which amounted to Ch$19,479 million (US$32.0 million), showed an
increase of 46.8% from the Ch$13,265 million (US$21.8 million) reported in the
third quarter of 2003. The higher level of provisions was associated with the
downgrading of several clients in the construction and manufacturing sectors
Other income and expenses amounted to Ch$7,806 million (US$12.8 million), an
increase of 47.9% over the Ch$5,278 million (US$8.7 million) reported in 3Q
2003. Other income and expenses was mainly composed of loan recoveries
(previously written off) of Ch$12,344 million (US$20.3 million), partially
offset by other non-operating expenses of Ch$5,816 million (US$9.6 million).
Operating expenses increased by 8.5% to Ch$59,772 million (US$98.2 million)
compared to the third 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$3,663 million (US$6.0 million)
compared to price-level restatement losses of Ch$406 million (US$0.7 million)
reported in 3Q 2003. The losses in 3Q 2004 reflect the higher inflation
experienced during the period (1.0% adjustment).
Net income increased by 5.9% to Ch$39,277 million (US$64.5 million) in 3Q 2004,
boosted by the strong growth in fee income and financial income (primarily
related to the higher inflation rate) as well as significant recovery of
previously written-off loans. Bottom line growth was particularly strong at the
subsidiary level as a result of increased fee income earned in connection with
stock brokerage and fund management services.
As of September 2004, the Bank's loan portfolio (net of interbank loans) had
grown by 6.2% to Ch$6,605,545 million (US$10.8 billion) over the last twelve
month period, mostly in other outstanding loans, consumer loans and contingent
loans. The increase in other outstanding loans is mainly related to mortgage
loans financed by mortgage bonds.
Banco de Chile is the second ranked bank in the country with a market share of
17.6% according to information published by the Chilean Superintendency of Banks
for the period ended September 30, 2004. Its return on capital and reserves
after taxes (annualized) reached 31.1%, compared to 17.7% for the local
financial system, according to the same source.
Page 10 of 15
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QUINENCO S.A.
Enrique Foster Sur N(0) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.com Third Quarter 2004
--------------------------------------------------------------------------------
FOOD & BEVERAGE SECTOR
The following table details Quinenco's proportionate share of income (loss) from
investments in the Food & Beverage sector during 2003 and 2004:
----------------------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE
----------------------------------------------------------------------------------------------------------------------------------
Ownership 3Q 2003 YTD 2003 2Q 2004 3Q 2004 3Q 2004 YTD 2004
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$
----------------------------------------------------------------------------------------------------------------------------------
CCU 30.8% 1,299 11,287 (17) 1,607 2.6 6,727
Indalsa (ex Lucchetti) 95.6% 92 (735) (1,564) (800) (1.3) (1,550)
----------------------------------------------------------------------------------------------------------------------------------
CCU
----------------------------------------------------------------------------------------------------------------------------------
Quarter Accumulated for Year
----------------------------------------------------------------------------------------------------------------------------------
3Q 2003 3Q 2004 3Q 2004 YTD 2003 YTD 2004 YTD 2004
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
----------------------------------------------------------------------------------------------------------------------------------
Sales 90,233 94,625 155.4 271,129 292,385 480.2
Operating income (loss) 7,594 8,034 13.2 24,373 35,770 58.7
Net Income (loss) 4,216 5,215 8.6 36,656 21,839 35.9
----------------------------------------------------------------------------------------------------------------------------------
Total Assets 603,060 553,935 909.7
Shareholders' equity 282,985 289,224 475.0
----------------------------------------------------------------------------------------------------------------------------------
3Q 2004 Results
CCU's sales in the third quarter of 2004 grew by 4.9% compared to the third
quarter of 2003, due to an increase in consolidated sales volumes and higher
average prices. The growth in sales volumes was led by the Argentine beer
segment (+12.3%), soft drinks, nectar and mineral water segment (+4.0%), the
Chilean beer segment (+2.9%) and the export wine segment (+5.7%). Higher average
prices are mostly explained by the Argentine and Chilean beer segments, the
average prices of which increased by 1.1% and 2.1%, respectively, as well as by
the domestic wine segment (+16.5%).
Operating income increased by 5.8% to Ch$8,034 million (US$13.2 million), mainly
due to an increase of 5.8% in gross profit, which resulted from the higher sales
level achieved during the quarter. The increase in operating income was
partially offset by an increase of in SG&A expense associated with the Chilean
and Argentine beer segments as well as the wine segment. The consolidated
operating margin reached 8.5% of sales, compared to 8.4% in the same period of
2003.
CCU reported non-operating losses of Ch$1,566 million (US$2.6 million) compared
to non-operating losses of Ch$1,841 million (US$3.0 million) in 3Q 2003. 3Q 2004
non-operating results benefited from a comparatively lower debt level and lower
prevailing interest rates, which served to reduce interest expense.
Additionally, the revaluation of the Chilean peso during the quarter which
resulted in exchange rate gains, a reduction in other non-operating expenses and
price-level restatement gains also contributed to the improvement, however this
was partially offset by a sharp decline in financial income due to lower average
cash balances and low prevailing interest rates on time deposits.
Net income improved by 23.7% in relation to 3Q 2003, amounting to Ch$5,215
million (US$8.6 million) for the quarter. The strong improvement in bottom line
results was due to the aforementioned 5.8% hike in operating results, improved
non-operating results and a reduction in income taxes as a result of a lower
level of deferred income tax charges during the period.
Page 11 of 15
--------------------------------------------------------------------------------
QUINENCO S.A.
Enrique Foster Sur N(0) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.com Third Quarter 2004
--------------------------------------------------------------------------------
INDUSTRIA NACIONAL DE ALIMENTOS (EX-LUCCHETTI)
------------------------------------------------------------------------------------------------------------------------------
Quarter Accumulated for Year
------------------------------------------------------------------------------------------------------------------------------
3Q 2003 3Q 2004 3Q 2004 YTD 2003 YTD 2004 YTD 2004
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
------------------------------------------------------------------------------------------------------------------------------
Sales 15,620 (11) -- 46,383 1,090 1.8
Operating income (loss) 815 (199) (0.3) 2,127 (100) 0.2
Net Income (loss) 98 (837) (1.4) (785) (1,621) (2.7)
------------------------------------------------------------------------------------------------------------------------------
Total Assets 73,176 28,430 46.7
Shareholders' equity 15,842 26,924 44.2
------------------------------------------------------------------------------------------------------------------------------
3Q 2004 Results
Lucchetti sold its principal business, the Chilean-based pasta, edible oil and
soup business (Lucchetti Chile) on March 31, 2004 (in consideration of this
fact, the Chilean Superintendency of Securities and Insurance (SVS) authorized
Empresas Lucchetti to deconsolidate Lucchetti Chile's balance sheet and results
of operations for the quarter ended March 31st)). Lucchetti reported a gain on
sale (net of provisions) in connection with the disposal of Lucchetti Chile of
Ch$3,010 million (US$4.9 million).
Following the divestiture of its pasta business, Empresas Lucchetti's remaining
assets principally consist of its investment in Calaf, a joint venture with
ECUSA, a subsidiary of CCU, acquired in January 2004 and Lucchetti Peru,
including settlement rights in its ongoing arbitration against the Peruvian
government.
Page 12 of 15
--------------------------------------------------------------------------------
QUINENCO S.A.
Enrique Foster Sur N(0) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.com Third Quarter 2004
--------------------------------------------------------------------------------
TELECOMMUNICATIONS SECTOR
The following table details Quinenco's proportionate share of income from
investments in the Telecommunications sector during 2003 and 2004:
---------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS
---------------------------------------------------------------------------------------------------------------------------------
Ownership 3Q 2003 YTD 2003 2Q 2004 3Q 2004 3Q 2004 YTD 2004
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$
---------------------------------------------------------------------------------------------------------------------------------
Telsur 73.6% 1,435 3,926 1,243 1,199 2.0 3,669
Entel (1) 5.7% 823 2,569 715 21 -- 1,563
---------------------------------------------------------------------------------------------------------------------------------
(1) Non-controlling interest
TELSUR
---------------------------------------------------------------------------------------------------------------------------------
Quarter Accumulated for Year
---------------------------------------------------------------------------------------------------------------------------------
3Q 2003 3Q 2004 3Q 2004 YTD 2003 YTD 2004 YTD 2004
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
---------------------------------------------------------------------------------------------------------------------------------
Sales 13,142 13,281 21.8 39,086 39,108 64.2
Operating income (loss) 3,141 3,254 5.3 9,302 9,212 15.1
Net Income (loss) 1,952 1,628 2.7 5,334 4,982 8.2
---------------------------------------------------------------------------------------------------------------------------------
Total Assets 136,238 131,722 216.3
Shareholders' equity 61,084 62,879 103.3
----------------------------------------------------------------------------------------------------------------------------------
3Q 2004 Results
Telefonica del Sur's revenues reached Ch$13,281 million (US$21.8 million)
varying only slightly from the Ch$13,142 million (US$21.6 million) reported in
the third quarter of 2003. Nonetheless, the revenue mix favored non-regulated
services such as Internet, security services and business services. A decline of
5.8% in revenue associated with fixed telephony, access charges, long distance
and public telephony was entirely offset by a 30.3% 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 51.2% of all revenues, followed by user access charges (11.0%),
long distance services (8.4%), public telephones (5.0%), and other non-regulated
services (24.4%).
Operating profit grew by 3.6% during the quarter reaching Ch$3,254 million
(US$5.3 million), outpacing the growth in sales. The increase in operating
profit was primarily attributable to fixed monthly rate telephone plans and
internet services.
Telsur reported non-operating losses of Ch$1,053 million (US$1.7 million),
compared to non-operating losses of Ch$648 million (US$1.1 million) reported in
3Q 2003. 3Q 2003 non-operating results included non-recurring income related to
an insurance settlement, which partially explains the lower results this
quarter. Additionally, 3Q 2004 results include the costs of a financial
restructuring undertaken in September, the benefits of which will be reflected
in future periods (Ch$196 million, US$0.3 million). Telsur reported net income
of Ch$1,628 million (US$2.7 million), a decrease of 16.6% compared to the third
quarter of 2003, due to the aforementioned deterioration in non-operating
results.
Page 13 of 15
--------------------------------------------------------------------------------
QUINENCO S.A.
Enrique Foster Sur N(0) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.com Third Quarter 2004
--------------------------------------------------------------------------------
MANUFACTURING SECTOR
The following table details Quinenco's proportionate share of income (loss) from
investments in the Manufacturing sector during 2003 and 2004:
------------------------------------------------------------------------------------------------------------------------------
MANUFACTURING
------------------------------------------------------------------------------------------------------------------------------
Ownership 3Q 2003 YTD 2003 2Q 2004 3Q 2004 3Q 2004 YTD 2004
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$
------------------------------------------------------------------------------------------------------------------------------
Madeco (1) 53.4% (253) (4,607) 1,683 1,553 2.6 4,192
------------------------------------------------------------------------------------------------------------------------------
(1) On July 1, 2004, Quinenco's interest in Madeco was reduced to 53.4%
MADECO
--------------------------------------------------------------------------------------------------------------------------------
Quarter Accumulated for Year
--------------------------------------------------------------------------------------------------------------------------------
3Q 2003 3Q 2004 3Q 2004 YTD 2003 YTD 2004 YTD 2004
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
--------------------------------------------------------------------------------------------------------------------------------
Sales 61,063 85,304 140.1 187,459 248,035 407.4
Operating income (loss) 1,768 6,125 10.1 7,420 20,361 33.4
Net Income (loss) (466) 2,909 4.8 (5,627) 7,688 12.6
--------------------------------------------------------------------------------------------------------------------------------
Total assets 407,600 356,026 584.7
Shareholders' equity 176,991 164,529 270.2
--------------------------------------------------------------------------------------------------------------------------------
3Q 2004 Results
Madeco's sales in the third quarter of 2004 increased by Ch$24,241 million
(US$39.8 million) or 39.7% from Ch$61,063 million (US$100.3 million) to
Ch$85,304 million (US$140.1 million), primarily attributable to higher sales of
the wire and cable and brass mill business units, which rose by 45.8% and 74.9%,
respectively. Wire and cable sales, which accounted for Ch$13,582 million
(US$22.3 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 in Chile and
Argentina by Ch$10,305 million (US$16.9 million). In general terms, the more
favorable economic climate in Chile which stimulated the construction sector in
particular contributed to sales growth during the quarter.
Sales of the wire and cable business unit (whose principal operation is Ficap
Brazil) accounted for 50.7% of total sales, followed by brass mills (28.2%),
flexible packaging (13.6%) and aluminum profiles (7.5%).
Sales outpaced the increase in raw materials costs and in spite of higher SG&A
expenses in absolute terms, operating profits rose by more than 247% to Ch$6,125
million (US$10.1 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 7.2%
versus 2.9% one year ago.
Non-operating losses amounted to Ch$1,977 million (US$3.2 million) versus
Ch$1,882 million (US$3.1 million) in 3Q 2003. Non-operating results were mainly
composed of price-level restatement and FX translation gains (net) amounting to
Ch$1,331 million (US$2.2 million), interest expense (net) of Ch$ 1,988 million
(US$3.3 million) and other non-operating expenses (net) of Ch$1,021 million
(US$1.7 million). Worth mentioning is that interest expense (net) has declined
by 38.4% since September 2003 as a result of Madeco's considerably lighter debt
load and lower prevailing interest rates.
Page 14 of 15
--------------------------------------------------------------------------------
QUINENCO S.A.
Enrique Foster Sur N(0) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.com Third Quarter 2004
--------------------------------------------------------------------------------
Madeco reported pre tax profit of Ch$4,148 million (US$6.8 million) for the
third quarter of 2004, a dramatic improvement from the net loss of Ch$114
million (US$0.2 million) in 3Q 2003, entirely attributable to the aforementioned
improvement in Madeco's operating performance during the quarter. Income taxes,
which increased from Ch$446 million (US$0.7 million) in 3Q 2003 to Ch$987
million (US$1.6 million), partially offset the increase. Madeco's net income
amounted to Ch$2,909 million (US$4.8 million) in the third quarter of 2004, up
by Ch$3,375 million (US$5.5 million) from the same period in 2003.
#
All of Quinenco's Earnings and Press Releases and other relevant information on
the Company, including quarterly financial statements, are available for viewing
on the Company's website:
www. quinenco.cl
www. quinencogroup.com
Page 15 of 15
--------------------------------------------------------------------------------
QUINENCO S.A.
Enrique Foster Sur N(0) 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
QUINENCO S.A.
By: s/s Luis Fernando Antunez
--------------------------------
Name: Luis Fernando Antunez
Title: Authorized Representative
Dated: November 9, 2004