UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISION
Washington D.C. 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 2006
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 2006 consolidated results
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QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.com Second Quarter 2006
--------------------------------------------------------------------------------
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 2006
(Santiago, Chile, August 10, 2006) 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, 2006.
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 (3.7% year-over-year). Figures in US$ have been
converted from Chilean pesos (Ch$) at the observed exchange rate on June 30,
2006 (Ch$539.44 = US$1.00) and are only provided for the reader's convenience.
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2Q 2006 HIGHLIGHTS
--------------------------------------------------------------------------------
- Consolidated sales rose by 45.8% in 2Q 2006 to Ch$169,501 million
(US$314.2 million), mainly attributable to a 52.6% growth in Madeco's
revenues.
- Operating income jumped by 150.9% to Ch$21,691 million (US$40.2 million),
mainly attributable to Madeco's operations, which benefited from a
significant increase in sales volumes and higher average prices.
- Results from equity method investments reflected continued earnings growth
of CCU and Banco de Chile. Income from these investments increased by 7.3%
to Ch$17,449 million (US$32.3 million).
- Non-operating income reached Ch$3,597 million (US$6.7 million) compared to
Ch$3,242 million (US$6.0 million) in 2Q 2005.
- 2Q 2006 net income amounted to Ch$16,325 million (US$30.3 million) in 2Q
2006, an increase of 70.3% from the Ch$9,586 million (US$17.8 million)
reported in 2Q 2005 as a consequence of the improvement in operating and
non-operating results. YTD net earnings amounted to Ch$31,470 million
(US$58.3 million), down by 22.0% from the Ch$40,351 million (US$74.8
million) reported for the six months ended June 30, 2005, which included
non-recurring gains on the sale of Quinenco's investment in Almacenes
Paris.
- Earnings per share amounted to Ch$15.12 (US$0.03) and earnings per ADR to
Ch$151.19 (US$0.28) for the second quarter of 2006.
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Page 1 of 13
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QUINENCO S.A.
Enrique Foster Sur No 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
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QUINENCO S.A.
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GROUP HIGHLIGHTS - SECOND QUARTER 2006 AND SUBSEQUENT EVENTS
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--------------------------
Quinenco
--------------------------
At the General Ordinary Shareholders' Meeting held on April 27, 2006,
shareholders approved a dividend distribution corresponding to 2005 net income
of Ch$14.44793 per share, payable to shareholders registered with the company as
of May 10, 2006. The total amount of the dividend is Ch$15,600 million,
equivalent to 32.65% of 2005 (liquid) net income.
--------------------------
Banco de Chile
--------------------------
In an Extraordinary Shareholders' Meeting held on March 23, 2006, shareholders
agreed to capitalize 30% of Banco de Chile's 2005 net income, equivalent to
Ch$30,984 million. Subsequently, on May 11, 2006, the bank issued 957,781,060
fully paid-in shares, which were distributed at a ratio of 0.02461 shares for
each Banco de Chile share held, to those shareholders registered with the bank
as of May 5, 2006. Banco de Chile's total outstanding shares increased to
69,037,564,665 shares as of May 11, 2006. As a consequence of the share issue,
we received 488,610,258 fully paid-in shares in Banco de Chile, and our dividend
rights in the bank increased from 29.2% to 29.5%.
--------------------------
Madeco
--------------------------
On May 5, 2006, in a public auction on the Santiago Stock Exchange, the
remaining 192,802,758 shares of Madeco's capital increase initiated in 2005 were
sold for Ch$9,351 million. As a result of the capital increase, Madeco's total
outstanding shares increased to 5,541,192,887. Quinenco did not subscribe for
additional shares, and as a consequence, its interest in Madeco decreased from
47.8% to 46.1%.
Madeco's CEO and Operations Manager were granted shares of Madeco in accordance
with the company's stock incentive program approved by Madeco's Board of
Directors on May 30, 2006. As a result, in July, Madeco's total outstanding
subscribed and paid shares increased from 5,541,192,887 to 5,661,192,887.
Following the share increase, Quinenco's participation in Madeco decreased from
46.1% to 45.2%.
--------------------------
Entel
--------------------------
On April 25, 2006, at Entel's General Ordinary Shareholders' Meeting,
shareholders elected a new Board of Directors for a three year term. Quinenco's
representative on the Board was not re-elected. As a consequence, Quinenco no
longer accounts for its investment in Entel using the equity method investment
and starting March 31, 2006, accounts for its investment in Entel using the cost
method.
Page 2 of 13
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QUINENCO S.A.
Enrique Foster Sur No 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
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QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.com Second Quarter 2006
--------------------------------------------------------------------------------
Net Income Contribution
-----------------------------------------------------------------------------------------------------------------------
Quinenco's
ownership % 2Q 2005 1Q 2006 2Q 2006 2Q 2006 YTD 2005 YTD 2006
Sector/Company at 6/30/2006 MCh$ MCh$ MCh$ MUS$ MCh$ MCh$
-----------------------------------------------------------------------------------------------------------------------
Financial Services:
Banco de Chile (1)(3) 52.2% 15,955 13,374 16,372 30.3 28,890 29,746
-----------------------------------------------------------------------------------------------------------------------
Food & Beverage:
CCU (4) 33.1% 310 6,849 1,077 2.0 6,504 7,926
-----------------------------------------------------------------------------------------------------------------------
Telecommunications:
Telsur (1) 73.7% 1,412 1,560 1,459 2.7 2,775 3,019
Entel (2) 5.7% 926 1,349 (20) -- 2,070 1,329
-----------------------------------------------------------------------------------------------------------------------
Manufacturing:
Madeco (1) 46.1% 2,386 3,131 6,146 11.4 4,459 9,277
-----------------------------------------------------------------------------------------------------------------------
Other operating companies (5) (1,807) (1,185) (2,480) (4.6) (2,365) (3,665)
-----------------------------------------------------------------------------------------------------------------------
Total operating companies 19,182 25,078 22,554 41.8 42,333 47,632
-----------------------------------------------------------------------------------------------------------------------
Quinenco & holding companies (9,596) (9,933) (6,229) (11.5) (1,982) (16,162)
-----------------------------------------------------------------------------------------------------------------------
Total 9,586 15,145 16,325 30.3 40,351 31,470
-----------------------------------------------------------------------------------------------------------------------
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. As of
3/31/2006 Quinenco's investment in Entel is accounted for using the cost
method and dividends received are included with Quinenco and holding
companies.
(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 Hoteles Carrera, Habitaria
and Indalsa.
---------------------------
Net Income - 2Q 2006
---------------------------
Quinenco reported net income for the second quarter of 2006, which
amounted to Ch$16,325 million (US$30.3 million), up by 70.3% compared to
the net income of Ch$9,586 million (US$17.8 million) reported in the
second quarter of 2005. The increase in quarterly net income was
attributable to both the good performance of operating companies as well
as a reduction in expenses at the Quinenco corporate level. Worth
mentioning is that Quinenco's investment in Entel is now being accounted
for under the cost method and income from Entel, principally dividends,
are now included with results of Quinenco and holding companies.
The net income contribution from operating companies reached Ch$22,554
million (US$41.8 million), up by 17.6% compared to the same quarter in
2005. The increase was attributable to higher results from all of Quinenco
main operating companies, particularly Madeco.
Earnings per ordinary share amounted to Ch$15.12 (US$0.03) and earnings
per ADR, Ch$151.19 (US$0.28).
Page 3 of 13
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QUINENCO S.A.
Enrique Foster Sur No 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
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QUINENCO S.A.
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--------------------------------------------------------------------------------
Consolidated Income Statement Breakdown
-----------------------------------------------------------------------------------------------------------------------
2Q 2005 1Q 2006 2Q 2006 2Q 2006 YTD 2005 YTD 2006
MCh$ MCh$ MCh$ MUS$ MCh$ MCh$
-----------------------------------------------------------------------------------------------------------------------
Revenues
-----------------------------------------------------------------------------------------------------------------------
Madeco 101,898 120,142 155,506 288.3 193,542 275,648
Telsur 13,849 13,749 13,756 25.5 27,474 27,506
Quinenco & holding 481 305 239 0.4 1,121 543
-----------------------------------------------------------------------------------------------------------------------
Total 116,228 134,196 169,501 314.2 222,137 303,697
-----------------------------------------------------------------------------------------------------------------------
Operating income (loss)
-----------------------------------------------------------------------------------------------------------------------
Madeco 7,705 9,654 21,110 39.1 15,413 30,764
Telsur 3,300 3,121 2,923 5.4 6,353 6,044
Quinenco & holding (2,360) (2,363) (2,342) (4.3) (5,136) (4,706)
-----------------------------------------------------------------------------------------------------------------------
Total 8,645 10,412 21,691 40.2 16,630 32,102
-----------------------------------------------------------------------------------------------------------------------
Non-operating income (loss)
-----------------------------------------------------------------------------------------------------------------------
Interest income 794 1,258 1,228 2.3 1,448 2,486
Share of net income/loss from related co:
Banco de Chile 15,955 13,374 16,372 30.3 28,890 29,746
CCU 310 6,849 1,077 2.0 6,504 7,926
Entel 926 1,349 (20) -- 2,070 1,329
Other equity investments 216 (19) 212 0.4 156 194
Other non-op income 792 515 3,504 6.5 26,109 4,019
Amortization of GW expense (5,732) (5,318) (6,190) (11.5) (11,137) (11,507)
Interest expense (7,253) (7,071) (8,000) (14.8) (14,663) (15,071)
Other non-op expenses (3,029) (1,755) (3,146) (5.8) (5,303) (4,901)
Price-level restatement (1,149) 709 (901) (1.7) (1,247) (193)
Foreign exchange gains & losses 1,412 1,429 (539) (1.0) 1,329 890
-----------------------------------------------------------------------------------------------------------------------
Total 3,242 11,320 3,597 6.7 34,156 14,918
-----------------------------------------------------------------------------------------------------------------------
Income Tax (78) (2,430) (1,017) (1.9) (5,879) (3,447)
Extraordinary items -- -- -- -- -- --
Minority Interest (2,988) (4,544) (8,311) (15.4) (5,636) (12,855)
Amortization of negative GW 765 387 365 0.7 1,080 754
-----------------------------------------------------------------------------------------------------------------------
Net income (loss) 9,586 15,145 16,325 30.3 40,351 31,470
-----------------------------------------------------------------------------------------------------------------------
-----------------------
Revenues - 2Q 2006
-----------------------
Consolidated revenues for the second quarter of 2006 were Ch$169,501
million (US$314.2 million), up by 45.8% from the Ch$116,228 million
(US$215.5 million) reported in the second quarter of 2005, explained by a
52.6% increase in Madeco's sales as a result of higher volume sales in its
main markets and higher average prices associated with the increase in
copper prices.
Consolidated sales can be broken down as follows: Madeco (91.7%),
Telefonica del Sur (8.1%) and others (0.2%).
-----------------------------
Operating Income - 2Q 2006
-----------------------------
Operating income for the second quarter of 2006 was Ch$21,691 million
(US$40.2 million), up by 150.9% from the Ch$8,645 million (US$16.0
million) reported in the second quarter of 2005. The sharp rise in
consolidated operating income was attributable to Madeco's operations,
which benefited from a significant increase in sales volumes and prices
transfers to customers of higher copper prices.
Page 4 of 13
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QUINENCO S.A.
Enrique Foster Sur No 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
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---------------------
EBITDA - 2Q 2006
---------------------
EBITDA reached Ch$28,895 million (US$53.6 million) in 2Q 2006, compared to
Ch$15,353 million (US$28.5 million) in 2Q 2005, an increase of 88.2%
compared to the same period of 2005, mainly attributable to Madeco's
operations.
-----------------------------------
Non-Operating Results -2Q 2006
-----------------------------------
Quinenco reported non-operating income of Ch$3,597 million (US$6.7
million) in the second quarter of 2006, compared to non-operating income
of Ch$3,242 million (US$6.0 million) in the same quarter of 2005. The
variation between the two periods is mostly explained by an increase in
non-operating income and interest income, the effect of which was
partially offset by higher interest expense and a deterioration in foreign
exchange results. 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$17,641 million (US$32.7 million),
compared to Ch$17,407 million (US$32.3 million) in 2Q 2005, an
increase of 1.3%. The increase mainly corresponded to growth in the
proportionate share of net income from CCU (+Ch$767 million or
US$1.4 million) and Banco de Chile (+Ch$417 million or US$0.8
million), partially offset by a reduction of Ch$946 million (US$1.8
million) in income from Entel, which as of the second quarter of
2006, is no longer being accounted for under the equity method.
-------------------------------
Other non-operating income
-------------------------------
Other non-operating income was Ch$3,504 million (US$6.5 million),
compared to Ch$792 million (US$1.5 million) in the second quarter of
2005. Other non-operating income in 2Q 2006 was mainly composed of
dividends received from Quinenco's investment in Entel, (now being
accounted for under the cost method) of Ch$2,560 million (US$4.7
million) and a gain of Ch$706 million (US$1.3 million) in connection
with Quinenco's non-participation in Madeco's capital increase in
May (offset by a charge to amortization of goodwill expense for the
same amount).
-------------------------------------
Amortization of goodwill expense
-------------------------------------
Amortization of goodwill expense amounted to Ch$6,190 million
(US$11.5 million) in the second quarter of 2006, compared to
Ch$5,732 million (US$10.6 million) reported in the same period of
2005. 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$285,810
million (US$529.8 million) as of June 30, 2006, Ch$272,236 million
(US$504.7 million) was associated with the acquisition of the banks.
In addition, included with 2Q 2006 amortization expense is
extraordinary amortization expense of Ch$706 million (US$1.3
million), which resulted from Quinenco's non-participation in
Madeco's capital increase in May (offset by a credit of the same
amount to other non-operating income).
----------------------
Interest Expense
----------------------
Interest expense for the second quarter of 2006 amounted to Ch$8,000
million (US$14.8 million), an increase of 10.3% compared to the same
period in 2005. The increase corresponds to higher interest expense
related to Madeco's operations as a result of an increase in bank
borrowings to finance additional working capital requirements
related to higher copper prices, and to a lesser extent, higher
interest expense at the corporate level. The increase in interest
expense during 2Q 2006 was partially offset by lower interest
expense at Telsur due to a reduction in its level of indebtedness.
Page 5 of 13
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QUINENCO S.A.
Enrique Foster Sur No 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
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----------------------------------
Other non-operating expenses
----------------------------------
Other non-operating expenses amounted to Ch$3,146 million (US$5.8
million) compared to Ch$3,029 million (US$5.6 million) in the second
quarter of 2005. Other non-operating expenses are mostly composed of
expenses associated with Indalsa Peru, asset write-downs and
provisions for contingencies and others.
----------------------------
Price-level restatement
----------------------------
Price-level restatement gains amounted to Ch$901 million (US$1.7
million) in the second quarter of 2006, compared to price-level
restatement losses of Ch$1,149 million (US$2.1 million) in the same
period in 2005.
---------------------------------------
Foreign Currency Exchange Differences
---------------------------------------
In 2Q 2006, the losses specific to foreign currency differences
amounted to Ch$539 million (US$1.0 million), compared to gains
amounting to Ch$1,412 million (US$2.6 million) reported in the
second quarter of 2005. The variation was almost entirely
attributable Madeco's operations which reported an increase in
hedging costs related to its Brazilian operations.
----------------------------
Income Taxes - 2Q 2006
----------------------------
Quinenco reported income tax expense of Ch$1,017 million (US$1.9 million),
compared to Ch$78 million (US$0.1 million) in the same period of 2005.
--------------------------------
Minority Interest - 2Q 2006
--------------------------------
In the second quarter of 2006, Quinenco reported a deduction from income
of Ch$8,311 million (US$15.4 million), compared to a deduction from income
of Ch$2,988 million (US$5.5 million) in 2Q 2005. The amount is mainly
related to minority shareholders' proportionate share of Madeco's and, to
a lesser extent, Telefonica del Sur's second quarter 2006 income.
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET ANALYSIS (vis-a-vis the 1st quarter of 2006)
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Condensed Consolidated Balance Sheet
---------------------------------------------------------------------------------------------------------------
As of As of As of As of
6/30/05 3/31/06 6/30/06 6/30/06
MCh$ MCh$ MCh$ MUS$
---------------------------------------------------------------------------------------------------------------
Current assets 304,647 340,851 370,660 687.1
Fixed assets 282,838 259,823 258,828 479.8
Other assets 824,354 821,343 842,839 1,562.5
---------------------------------------------------------------------------------------------------------------
Total assets 1,411,839 1,422,017 1,472,327 2,729.4
---------------------------------------------------------------------------------------------------------------
Current liabilities 129,166 124,966 129,808 240.7
Long-term liabilities 468,325 424,460 438,439 812.8
Minority interest 119,581 147,009 163,578 303.2
Shareholders' equity 694,767 725,582 740,502 1,372.7
---------------------------------------------------------------------------------------------------------------
Total liabilities & shareholders' equity 1,411,839 1,422,017 1,472,327 2,729.4
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Page 6 of 13
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QUINENCO S.A.
Enrique Foster Sur No 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
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---------------------
Current Assets
---------------------
Current assets increased 8.7% compared to the first quarter of 2006,
mainly due to an increase in Madeco's accounts receivable and
inventory levels.
------------------------------------
Fixed Assets and Other Assets
------------------------------------
Fixed assets did not vary significantly compared to the first
quarter of 2006. Other assets increased by 2.6%, mainly due to an
increase in Quinenco's investment in Banco de Chile related to new
shares received (in lieu of dividends) in connection with a
capitalization of a portion of the bank's 2005 net income.
----------------------------
Current Liabilities
----------------------------
Current liabilities increased by 3.9% compared to the first quarter
of 2006, primarily due to an increase in short term bank
obligations, accounts payable and deferred income at Madeco.
-------------------------------
Long-term Liabilities
-------------------------------
Long-term liabilities increased by 3.3% compared to the first
quarter of 2006, mainly attributable to an increase in long-term
bank obligations at Madeco.
----------------------------
Minority Interest
----------------------------
Minority interest increased by 11.3% compared to the first quarter
of 2006, mainly attributable to minority shareholders' interest in
Madeco.
----------------
Equity
----------------
Shareholders' equity did not vary significantly compared to the
first quarter of 2006.
------------------------------------------
Quinenco Corporate Level Debt and Cash
------------------------------------------
As of June 30, 2006, financial debt at the corporate level was Ch$338.195
million (US$626.9 million). As of the same date, cash and cash equivalents
amounted to Ch$108,252 million (US$200.7 million). The debt to total
capitalization ratio at the corporate level was 31.3%.
----------------------
NAV
----------------------
As of June 30, 2006, the estimated net asset value (NAV) of Quinenco was
US$1.950 million (Ch$974 per share) and market capitalization was US$1.221
million (Ch$610 per share). The discount to NAV is estimated at 37% as of
the same date.
NAV as of 6/30/2006
US$1.9 billion
[PIE CHART OMITTED]
Page 7 of 13
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QUINENCO S.A.
Enrique Foster Sur No 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
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NAV/Share Price Evolution
as of 6/30/2006
[LINE CHART OMITTED]
------------------------------------------
SECTOR /OPERATING COMPANY ANALYSIS
------------------------------------------
-------------------------
FINANCIAL SERVICES SECTOR
-------------------------
The following table details Quinenco's proportionate share of income from
investments in the Financial Services sector during 2005 and 2006:
---------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES
---------------------------------------------------------------------------------------------------------------
Ownership 2Q 2005 YTD 2005 1Q 2006 2Q 2006 2Q 2006 YTD 2006
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$
---------------------------------------------------------------------------------------------------------------
Banco de Chile (1) 52.2% 15,955 28,890 13,374 16,372 30.3 29,746
---------------------------------------------------------------------------------------------------------------
1) Ownership % in the above table corresponds to voting rights in Banco de
BANCO DE CHILE
-------------------------------------------------------------------------------------------------------------
Quarter Accumulated for Year
-------------------------------------------------------------------------------------------------------------
2Q 2005 2Q 2006 2Q 2006 YTD 2005 YTD 2006 YTD 2006
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
-------------------------------------------------------------------------------------------------------------
Operating revenues 141,028 144,343 267.6 254,700 270,633 501.7
Provision for loan losses (1,791) (7,086) (13.1) (7,554) (13,719) (25.4)
Operating expenses (71,349) (75,255) (139.5) (135,569) (145,834) (270.3)
Net Income (loss) 54,192 55,287 102.5 96,542 100,422 186.2
-------------------------------------------------------------------------------------------------------------
Loan portfolio 7,775,846 8,783,581 16,282.8
Total assets 10,928,376 11,500,808 21,319.9
Shareholders' equity 642,526 734,228 1,361.1
-------------------------------------------------------------------------------------------------------------
Net interest margin 4.3% 4.5%
Net Financial Margin 4.2% 4.6%
Efficiency ratio 50.6% 52.1%
ROAE 35.3% 31.2%
ROAA 2.0% 1.9%
-------------------------------------------------------
Page 8 of 13
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Enrique Foster Sur No 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
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2Q 2006 Results
Banco de Chile's operating revenues increased by 2.4% to Ch$144,343 million
(US$267.6 million) in the second quarter of 2006. The increase in operating
revenues was mainly due to a rise of Ch$15,711 million (US$29.1 million) or
15.6% in net financial income, mainly as a result of higher nominal interest
rates and a 13.0% annual expansion in the bank's loan portfolio, the effect of
which was partially offset by trading losses and a reduction in fee income. Fee
income, which fell by 4.7% or Ch$1,612 million (US$3.0 million) to Ch$32,453
million (US$60.2 million), was affected by higher sales and co-branding
expenses, partially offset by an increase in fee income from bank subsidiaries.
Losses on trading activities, which amounted to Ch$4,786 million (US$8.9
million) also served to partially offset the rise in operating revenues for the
quarter. Trading losses were mainly related to the mark to market losses on
investment securities held by the brokerage subsidiary.
Provisions for loan losses amounted to Ch$7,086 million (US$13.1 million), a
marked increase from the Ch$1,791 million (US$3.3 million) reported in the
second quarter of 2005. The level of 2Q 2005 loan loss provisions were
considered extraordinarily low due to the recovery of some non-performing loans
of the construction and retail sectors during that quarter.
Other income (net) amounted to Ch$5,093 million (US$9.4 million), compared to a
loss (net) of Ch$1,212 million (US$2.2 million) reported in 2Q 2005. Other
income and expenses was mainly composed of tax differences, lower provisions and
higher income related to the sale of assets received in lieu of payment.
Operating expenses increased by 5.5% to Ch$75,255 million (US$139.5 million)
compared to the second quarter of 2005, primarily due to higher expenses (of
approximately 50% on a quarter-over-quarter basis) associated with the bank's
foreign branches.
Price-level restatement losses totaled Ch$5,939 million (US$11.0 million)
compared to price-level restatement losses of Ch$6,175 million (US$11.4 million)
reported in 2Q 2005. The losses in 2Q 2006 reflect the lower inflation
experienced during the period (1.5% vs. 1.8% in 2Q 2005).
Net income increased by 2.0% to Ch$55,287 million (US$102.5 million) in 2Q 2006,
marking again a new level of quarterly earnings achieved by the bank. The
increase in net earnings was mainly due to the aforementioned 15.6% increase in
net financial income and, to a lesser extent, a higher level of other income
(net) resulting from the sale of assets received in lieu of payment. Quarterly
results reflect the bank's strong operating performance in its core businesses,
which more than compensated for the negative performance of its foreign branches
and reduced income from the brokerage subsidiary.
As of June 2006, the Bank's loan portfolio (net of interbank loans) had grown by
13.0% to Ch$8,783,581 million (US$16.3 billion) over the last twelve month
period, mostly related to increases in commercial loans, contingent loans,
consumer loans and mortgage loans.
Banco de Chile is the second ranked bank in the country with a market share of
17.7% according to information published by the Chilean Superintendency of Banks
for the period ended June 30, 2006. Its return on capital and reserves after
taxes (annualized) reached 31.7%, making it one of the most profitable banks in
the country for the same period. The Chilean financial system as a whole
reported a return on capital and reserves of 19.3%, according to the same
source.
Page 9 of 13
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QUINENCO S.A.
Enrique Foster Sur No 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.com Second Quarter 2006
--------------------------------------------------------------------------------
----------------------
FOOD & BEVERAGE SECTOR
----------------------
The following table details Quinenco's proportionate share of income (loss) from
investments in the Food & Beverage sector during 2005 and 2006:
--------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE
--------------------------------------------------------------------------------------------------------------
Ownership 2Q 2005 YTD 2005 1Q 2006 2Q 2006 2Q 2006 YTD 2006
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$
--------------------------------------------------------------------------------------------------------------
CCU 33.1% 310 6,504 6,849 1,077 2.0 7,926
--------------------------------------------------------------------------------------------------------------
CCU
--------------------------------------------------------------------------------------------------------------
Quarter Accumulated for Year
--------------------------------------------------------------------------------------------------------------
2Q 2005 2Q 2006 2Q 2006 YTD 2005 YTD 2006 YTD 2006
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
--------------------------------------------------------------------------------------------------------------
Sales 102,249 110,013 203.9 233,789 251,384 466.0
Operating income (loss) 4,995 5,581 10.3 31,091 32,792 60.8
Net Income (loss) 1,006 3,257 6.0 21,109 23,977 44.4
--------------------------------------------------------------------------------------------------------------
Total Assets 635,121 628,790 1,165.6
Shareholders' equity 316,931 327,818 607.7
--------------------------------------------------------------------------------------------------------------
--------------------------
2Q 2006 Results
--------------------------
In the second quarter of 2006, CCU's sales grew by 7.6% compared to the second
quarter of 2005, due to an increase in consolidated sales volumes and higher
average prices. The growth in sales volumes was led by the Chilean beer segment
(+20.9%), the Argentine beer segment (+8.6%), the soft drinks, nectar and
mineral water segment (+9.8%) and the export and Argentine wine segments (+4.6%
and +12.5%, respectively). These volumes increases were partially offset by
lower sales volumes of the Chilean domestic wine and pisco segments. Higher
average prices were mostly attributable to the pisco and Argentine beer and wine
segments, partially offset by declines in prices associated with the other
segments.
The increase in sales translated directly into an improvement of 11.7% in CCU's
operating income for the period which reached Ch$5,581 million (US$10.3
million). The increase in gross income was partially offset by a 6.2% increase
in SG&A expense associated with the Chilean beer, soft drinks, Argentine beer
and pisco segments. The consolidated operating margin, which reflects the
seasonality of CCU's business in the winter months, reached 5.1% of sales,
compared to 4.9% in the same period of 2005.
CCU reported non-operating losses of Ch$1,866 million (US$3.5 million) compared
to non-operating losses of Ch$3,058 million (US$5.7 million) in 2Q 2005. The
improvement in non-operating results was primarily attributable to a
non-recurring gain on the sale of a property site, included with other
non-operating income. Likewise, lower interest expense also contributed to the
improvement in non-operating results during the quarter, although this was
partially offset by price-level restatement losses, extraordinary goodwill
expense, and to a lesser extent, foreign currency exchange losses.
Net earnings improved from Ch$1,006 million (US$1.9 million) in 2Q 2005 to
Ch$3,257 million (US$6.0 million) in 2Q 2006. Quarterly results benefited from
the higher sales level achieved, which led to a marked increase in operating
income, as well as the aforementioned reduction in non-operating losses during
the period.
Page 10 of 13
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QUINENCO S.A.
Enrique Foster Sur No 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.com Second Quarter 2006
--------------------------------------------------------------------------------
-------------------------
TELECOMMUNICATIONS SECTOR
-------------------------
The following table details Quinenco's proportionate share of income from
investments in the Telecommunications sector during 2005 and 2006:
--------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS
--------------------------------------------------------------------------------------------------------
Ownership 2Q 2005 YTD 2005 1Q 2006 2Q 2006 2Q 2006 YTD 2006
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$
--------------------------------------------------------------------------------------------------------
Telsur 73.7% 1,412 2,775 1,560 1,459 2.7 3,019
Entel (1) 5.7% 926 2,070 1,349 (20) -- 1,329
--------------------------------------------------------------------------------------------------------
(1) Non-controlling interest
TELSUR
--------------------------------------------------------------------------------------------------------------
Quarter Accumulated for Year
--------------------------------------------------------------------------------------------------------------
2Q 2005 2Q 2006 2Q 2006 YTD 2005 YTD 2006 YTD 2006
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
--------------------------------------------------------------------------------------------------------------
Sales 13,849 13,756 25.5 27,474 27,505 51.0
Operating income (loss) 3,300 2,923 5.4 6,353 6,044 11.2
Net Income (loss) 1,916 1,980 3.7 3,766 4,097 7.6
--------------------------------------------------------------------------------------------------------------
Total Assets 138,935 129,276 239.6
Shareholders' equity 68,459 70,008 129.8
--------------------------------------------------------------------------------------------------------------
------------------
2Q 2006 Results
------------------
Telefonica del Sur's revenues reached Ch$13,756 million (US$25.5 million)
varying only slightly from the Ch$13,849 million (US$25.7 million) reported in
the second quarter of 2005. 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 offset by a 11.5% increase in revenues
from Internet, security services, business services,(including data
transmission) and others. During the last quarter, Telsur launched a new product
which utilizes PAS wireless technology to allow customers greater mobility
within the confines of fixed line service through a short distance roaming
capacity (PHS). The initial response has been positive and over 10,000 handsets
were delivered during the quarter. This new product offering is expected to help
curb the substitution of fixed telephony for mobile telephony and other
alternatives which have continued to capture a portion of Telsur's traditional
sale base.
Basic telephony services accounted for 41.0% of all revenues, followed by other
non-regulated services (36.2%), user access charges (10.3%), long distance
services (7.5%) and public telephones (5.0%).
Operating income fell by 11.4% to Ch$2,923 million (US$5.4 million), mainly
explained by the increment in costs associated with the launching of PHS, which
include sales commissions and depreciation expense on handsets. In addition,
costs of Internet services rose during the quarter due to improvements made to
increase band width speed.
Telsur reported non-operating losses of Ch$450 million (US$0.8 million), down by
43.1% from the non-operating losses of Ch$791 million (US$1.5 million) reported
in 2Q 2005. The improvement in non-operating results was primarily attributable
to a reduction in interest expense as a result of a lighter debt load and an
improvement in price-level restatement results.
Telsur reported net income of Ch$1,980 million (US$3.7 million), an increase of
3.3% compared to the second quarter of 2005, mainly as a result of the
aforementioned improvement in non-operating results.
Page 11 of 13
--------------------------------------------------------------------------------
QUINENCO S.A.
Enrique Foster Sur No 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.com Second Quarter 2006
--------------------------------------------------------------------------------
--------------------
MANUFACTURING SECTOR
--------------------
The following table details Quinenco's proportionate share of income (loss) from
investments in the Manufacturing sector during 2005 and 2006:
--------------------------------------------------------------------------------------------------------
MANUFACTURING
--------------------------------------------------------------------------------------------------------
Ownership 2Q 2005 YTD 2005 1Q 2006 2Q 2006 2Q 2006 YTD 2006
% MCh$ MCh$ MCh$ MCh$ MUS$ MCh$
--------------------------------------------------------------------------------------------------------
Madeco 46.1% 2,386 4,459 3,131 6,146 11.4 9,277
--------------------------------------------------------------------------------------------------------
MADECO
-----------------------------------------------------------------------------------------------------------
Quarter Accumulated for Year
-----------------------------------------------------------------------------------------------------------
2Q 2005 2Q 2006 2Q 2006 YTD 2005 YTD 2006 YTD 2006
MCh$ MCh$ MUS$ MCh$ MCh$ MUS$
-----------------------------------------------------------------------------------------------------------
Sales 101,898 155,506 288.3 193,542 275,648 511.0
Operating income (loss) 7,705 21,110 39.1 15,413 30,764 57.0
Net Income (loss) 4,658 13,321 24.7 8,703 19,869 36.8
-----------------------------------------------------------------------------------------------------------
Total assets 379,954 422,490 783.2
Shareholders' equity 178,330 241,435 447.6
-----------------------------------------------------------------------------------------------------------
----------------------
2Q 2006 Results
----------------------
Madeco's sales in the second quarter of 2006 increased by Ch$53,608 million
(US$99.4 million) or 52.6% from Ch$101,898 million (US$188.9 million) to
Ch$155,506 million (US$288.3 million), due to a 14.2% increase in the volume
sold and higher average prices. The higher sales were attributable to the wire
and cable, brass mills and aluminum profiles business units which rose by 60.4%,
74.3% and 19.4%, respectively, compared to the same period of 2005. The increase
in consolidated sales was partially offset by lower sales of the flexible
packaging business unit, which fell by 4.2% during the quarter.
Sales of the wire and cable business unit (whose principal operation is Ficap
Brazil) accounted for 62.9% of total sales, followed by brass mills (23.8%),
flexible packaging (7.4%) and aluminum profiles (5.9%).
Since Madeco was able to pass on increases in raw material costs, particularly
copper and aluminum to customers, its higher sales level translated directly
into a marked improvement in the amount of operating income earned during the
second quarter of the year. Operating income rose by 174.0% from Ch$7,705
million (US$14.3 million) to Ch$21,110 million (US$39.1 million). Operating
income of the wire and cable business unit accounted for 62.7% of total
operating income, followed by brass mills (27.0%), flexible packaging (5.9%) and
aluminum profiles (4.4%). The operating margin rose to 13.6% of sales as a
consequence of the strong performance (from 7.6 in 2Q 2005). EBITDA reached
Ch$24,530 million (US$45.5 million), an increase of 131.1% compared to the
second quarter of 2005.
Non-operating losses amounted to Ch$4,950 million (US$9.2 million), up from the
Ch$2,230 million (US$4.1 million) reported in 2Q 2005. The increase in
non-operating losses was mainly attributable to foreign currency translation
losses related to hedging costs of the Brazilian subsidiary, price-level
restatement losses and higher interest expense associated with the additional
working capital needed to finance the rise in raw material costs.
Madeco reported a net profit of Ch$13,321 million (US$24.7 million) for the
second quarter of 2006, compared to net income of Ch$4,658 million (US$8.6
million) in 2Q 2005. The increase in net quarterly earnings was attributable to
the aforementioned improvement in Madeco's operating performance during the
second quarter, the effect of which was partially offset by higher non-operating
losses and a heavier income tax burden.
#
Page 12 of 13
--------------------------------------------------------------------------------
QUINENCO S.A.
Enrique Foster Sur No 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.com Second Quarter 2006
--------------------------------------------------------------------------------
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 13 of 13
--------------------------------------------------------------------------------
QUINENCO S.A.
Enrique Foster Sur No 20, 14th Floor
Santiago / CHILE
Phone (56-2) 750-7100
Fax # (56-2) 750-7101
--------------------------------------------------------------------------------
[LOGO]
QUINENCO S.A.
www.quinenco.cl
www.quinencogroup.com Second Quarter 2006
--------------------------------------------------------------------------------
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 10, 2006