LQU Quilmes Ind Quinsa

LUXEMBOURG, Aug. 14 /PRNewswire-FirstCall/ -- Quilmes Industrial (Quinsa) S.A. (NYSE:LQU) ("Quinsa" or the "Company") today announced its results for the six months ended June 30, 2007. Highlights - First half 2007 * Normalized EBITDA increased 20.1% to US$ 248.2 million from US$ 206.6 million a year earlier. * Soft drink volumes increased 14.8% to 5.7 million hectoliters. * Net sales increased 19% to US$ 621.2 million. * Net profit after tax increased 29.1% to US$ 100.2 million, or US$ 0.924 per share for the first half of 2007, compared to US$ 77.6 million, or US$ 0.716 per share a year earlier. Financial review - First half 2007 Beer volume sales increased to 8,496,000 hectoliters from 8,249,000 hectoliters a year earlier, due to improvements in Argentina, Bolivia and Uruguay; partially offset by volume declines in Chile and Paraguay. Volumes for soft drinks increased 14.8% to 5,692,000 hectoliters, reflecting a strong performance in both Argentina and Uruguay. Domestic volume breakdown (thousands of hectoliters) Six months to June 30, 2007 June 30, 2006 Argentina beer 5,472 5,362 Argentina CSD, and other beverages 5,437 4,731 Bolivia 1,337 1,160 Chile 319 339 Paraguay beer 979 1,035 Uruguay beer 340 322 Uruguay (CSD&W) 256 230 Exports & other, net 49 30 TOTAL 14,189 13,209 Net sales increased approximately 19% to US$ 621.2 million, from US$ 520.4 million in the first half of 2006. This was principally the result of higher pricing in Argentina (for both beer and soft drinks) and in Paraguay. Also contributing significantly to the increase in sales were the higher volumes for soft drinks in Argentina and for beer in Bolivia. The following is a breakdown of sales by business: Revenues breakdown (millions of dollars) Six months to June 30, 2007 June 30, 2006 Argentina beer 231.5 208.5 Argentina CSD, and other beverages 167.3 133.1 Bolivia 82.5 66.6 Chile 22.1 22.2 Paraguay beer 72.1 62.2 Uruguay beer 22.0 18.8 Uruguay (CSD&W) 10.5 9.0 Other (net) 13.2 0.0 TOTAL 621.2 520.4 Gross profit increased to US$ 365.3 million from US$ 304.4 million a year earlier. This was largely the result of price increases in all of the Company's markets and also of higher sales volumes in Argentina (particularly soft drinks) and Bolivia. These improvements allowed the Company to absorb increases in the cost of certain raw materials and inputs such as malt, cans and energy, as well as increases in the cost of labor, specifically in Argentina. Consolidated gross margin increased 0.3 percentage points to 58.8%, compared to 58.5% for the first half of 2006. Selling and marketing expenses increased 16.7% to US$ 130.1 million, largely as a result of higher transportation and labor costs motivated by higher sales volumes and higher salaries, particularly in Argentina. Administrative and general expenses increased 5.7% to US$ 22.3 million, principally as a result of higher labor expenses; partially offset by the achievement of administrative efficiencies. As a percentage of sales, they declined from 4.0% in 2006 to 3.6% in 2007. Other operating expenses (net) were US$ 7.4 million compared to US$ 5.0 million in 2006. These expenses include provisions constituted to cover potential new municipal taxes in Argentina. As a result of these variations, operating profit for the first half of 2007 increased to US$ 198.5 million, from US$ 159.1 million for the same period in 2006. Normalized EBITDA (that is, EBITDA before any income or expenses derived from the sale of fixed assets) increased 20.1% to US$ 248.2 million, from US$ 206.6 million in 2006. Net interest expense decreased to US$ 12.7 million compared to US$ 17 million for the first half of 2006. This was the effect of a decrease in the Company's net debt. Other non-operating expenses (net) slightly decreased to US$ 4.5 million for the first half of 2007, compared to US$ 4.9 million for the same period in 2006. The charge for income tax increased to US$ 61.7 million in 2007, from US$ 43.1 million in 2006 due to higher profit before tax. Net profit after tax increased approximately 29.1% to US$ 100.2 million, or US$ 0.924 per share, in 2007 from US$ 77.6 million, or US$ 0.716 per share, in 2006. Total shareholders' equity increased to US$ 735.3 million as of June 30, 2007 from US$ 572.0 million as of June 30, 2006. This was principally the result of accumulated profits for the twelve months to June 30, 2007. Minority interest increased US$ 10.3 million to US$ 84.2 million, from US$ 73.9 million on June 30, 2006, principally reflecting the minority shareholders' proportion of the Company's net income. The Company's net cash position - total cash and financial investments net of bank debt - was US$ 23.8 million as of June 30, 2007, compared to a US$ 128.0 million net debt position a year earlier. The net cash position for 2007 includes "Long-term financial investments" because they match certain long-term bank debt. The long-term portion of total bank debt was US$ 269.1 million, compared to US$ 256.4 million a year earlier. Capital expenditures, excluding acquisitions, reached US$ 58.8 million during the first half of 2007 and US$ 48.9 million for the same period in 2006. A large part of these investments was related to the acquisition of bottles and crates, the purchase of coolers to be installed at points of sale and the expansion of capacity at some locations in Argentina (related to the divestiture of the Lujan plant) and in Santa Cruz, Bolivia, necessary to cope with volume growth. MARKETS ARGENTINA: Beer: Total volume sales, including exports, increased 0.9% compared to the first half of 2006, reaching 5.5 million hectoliters. The Company's market share was 73.3% for the first half of 2007, according to Nielsen, compared to 78.3% a year earlier, due to the divestiture of three brands, in accordance with anti-trust requirements. Net revenues increased 11% to US$ 231.5 million for the first half of 2007, compared to US$ 208.5 million in 2006, reflecting the price increases introduced in January to catch-up with inflation. Thus, prices increased 10% in dollars compared to the first half last year. Higher volumes also contributed to the increase in revenues. The combination of higher revenues and strong cost controls resulted in a much improved financial performance. Thus, despite increases in labor and transportation costs, principally the result of higher salary costs, and higher prices for some raw material, EBITDA increased 10.8% to US$ 107.1 million for the first half of 2007, or 46.3% over sales, compared to US$ 96.7 million for the same period in 2006. Operating Highlights 1H 2007 1H 2006 Total volumes (hectoliters) (") 5,508,000 5,457,000 Net revenues (US$ mm) 231.5 208.5 Normalized operating profit (US$ mm) 88.5 76.0 Normalized EBITDA (US$ mm) 107.1 96.7 Normalized EBITDA margin 46.3% 46.4% (*) These figures include exports and inter-company sales. Soft Drinks: Volumes for soft drinks and other beverages increased 14.9% to 5,437,000 hectoliters, compared to the first half of 2006. This remarkable performance was the result of both market expansion and market share growth. The Company achieved a 30.0% share of the A-brand segment during the first half of 2007. The Company market share of the industry as a whole increased from 19.5% in 2006 to 20.7% in 2007. Market share growth was achieved as a result of several factors, including a better performance of the Pepsi brand, new product developments for the Pepsi and 7 UP brands, and an improved performance of the Company's distributors in the soft drinks category. Gatorade and H2Oh! also introduced some innovations. The H2Oh! brand, launched during the second half of 2005 to compete in the flavored beverages segment, continued to perform very well, adding new flavors and packages to its portfolio during the semester. Net sales were US$ 167.3 million, compared to US$ 133.1 million in the first half of 2006. This was due to higher volume sales and a 9% increase in average prices measured in dollar terms. Regarding the business' financial performance, production costs increased during the first half of 2007 compared to the first half of 2006, principally due to higher production volumes. Labor costs increased as a result of higher salaries. Higher revenues, however, offset these effects, allowing for a remarkable 44.6% increase in normalized EBITDA, to US$ 29.5 million. Operating Highlights 1 H 2007 1 H 2006 Total volumes (SD&W, and functional beverages - in hl) 5,437,000 4,731,000 Net revenues (US$ mm) 167.3 133.1 Normalized operating profit (US$ mm) 19.0 11.5 Normalized EBITDA (US$ mm) 29.5 20.4 Normalized EBITDA margin 17.6% 15.4% BOLIVIA: Domestic volume sales increased 15.3% during the first half of 2007, reaching 1,337,000 hectoliters compared to 1,160,000 hectoliters for the same period in 2006. This performance reflects strong market growth, since market share remained virtually unchanged. Net revenues increased 24.3% to US$ 82.8 million, as a result of the increase in both volumes and average prices. The latter increased approximately 7% in dollar terms, in line with inflation, as a result of regional price increases and improvements in the value chain. In terms of costs, higher production costs were motivated by an increase in raw material prices, labor and freight costs. As a result of these actions, Normalized EBITDA increased to US$ 50.5 million from US$ 41.1 million a year earlier. Operating Highlights 1 H 2007 1 H 2006 Total volumes (hectoliters) (*) 1,357,000 1,174,000 Net revenues (US$ mm) 82.8 66.6 Normalized operating profit (US$ mm) 43.2 33.7 Normalized EBITDA (US$ mm) 50.5 41.1 Normalized EBITDA margin 61.0% 61.7% (*) Includes exports and inter-company sales CHILE: Quinsa's domestic beer volumes decreased 5.4% to 319,000 hectoliters from 339,000 last year. The market remained flat while the Company had a slight market share decline. The Company strengthened its competitive position in the market with the launching of the Stella Artois brand, aimed at the important premium segment. It also introduced two dark beers under the Brahma brand. Net revenues remained flat at US$ 22.1 million, compared to US$ 22.2 million last year. This was principally the result of higher sales prices offset by the decline in volumes. Average pricing increased approximately 6% in the first six months of 2007 compared to a year earlier. In terms of costs, the Company was affected by the energy restrictions and higher prices for natural gas. Commercial expenses increased mainly as a result of the launching of the Stella Artois brand. As a result of these developments, EBITDA for the first half of the year declined to a negative US$ (4.1) million, compared to a negative US$ (2.5) million in 2006. Operating Highlights 1 H 2007 1 H 2006 Total volumes (hectoliters) (*) 319,000 339,000 Net revenues (US$ mm) 22.1 22.2 Normalized operating loss (US$ mm) (6.0) (4.1) Normalized EBITDA (US$ mm) (4.1) (2.5) Normalized EBITDA margin (18.7)% (11.5)% (*) Includes exports and inter-company sales PARAGUAY: Domestic beer volumes were 979,000 hectoliters in the first half of 2007 compared to 1,035,000 hectoliters a year earlier. This decline was the result of a market contraction, although new competition from imports also contributed to this situation. Market share for the first six months of 2007 was 95.1%, according to CCR store audits. In spite of this volume decline, net revenues increased 15.9% to US$ 72.1 million, principally as a result of higher pricing. Quinsa's average price increased 22.7%, as a result of a 13% appreciation (on average) of the local currency, price increases introduced in September 2006 to cope with expected inflation, a better brand mix as Brahma continues to expand its share, and successful revenue management. These effects resulted in a 22.0% increase in normalized EBITDA to US$ 42.7 million. Operating Highlights (beer business) 1 H 2007 1 H 2006 Total volumes (hectoliters) 979,000 1,035,000 Net revenues (US$ mm) 72.1 62.2 Normalized operating profit (US$ mm) 39.1 32.0 Normalized EBITDA (US$ mm) 42.7 35.0 Normalized EBITDA margin 59.2% 56.2% URUGUAY: Beer: Domestic beer volume sales have continued to post solid growth, reaching 340,000 hectoliters during the first half of 2007, compared to 322,000 in 2006 while average prices increased 9.4%. Soft drinks: Volumes for this business also posted very strong growth, increasing 11.5% compared to the first six months of 2006, and reaching 256,000 hectoliters. The business has benefited from the consolidation of the 1.25-liter glass returnable bottle, from a very good performance by the larger formats and from the launching of the H2Oh! Brand in two flavors during the second half of 2006. Net revenues increased to US$ 32.5 million compared to US$ 27.8 million last year, principally due to an increase in soft drink and beer volumes and prices. Nevertheless, increases in raw materials, labor, advertising and freight costs resulted in a 6.3% decline in normalized EBITDA, reaching US$ 9.0 million, compared to US$ 9.6 million in 2006. Operating Highlights 1 H 2007 1 H 2006 Total volumes (beer, hectoliters) (*) 353,000 331,000 Total volumes (CSD&W, hectoliters) 256,000 230,000 Net revenues (US$ mm) 32.5 27.8 Normalized operating profit (US$ mm) 6.4 7.6 Normalized EBITDA (US$ mm) 9.0 9.6 Normalized EBITDA margin 27.6% 34.3% (*) Includes exports and inter-company sales OTHER MATTERS Conversion of A shares: During July, 2007 the Company received 1,388,530 class A shares from its minority shareholders, and delivered to them 138,853 class B shares in exchange. This was the result of Quinsa's annual exchange program for shareholders. Having completed this exchange, the balance of the Company's own shares held in Treasury as of the date of this release is the following: Class A shares 19,042,353 Class B shares 1,647,230 Shares outstanding, net of Treasury stock, are: Class A shares 611,341,810 Class B shares 47,259,863 ABOUT QUINSA Quinsa is a Luxembourg-based holding company that controls 93% of Quilmes International (Bermuda) ("QIB"). The remaining stake is held by Companhia de Bebidas das Am�ricas -- AmBev ("AmBev"). Quinsa, through QIB, controls beverage and malting businesses in five Latin American countries. Its beer brands are strong market leaders in Argentina, Bolivia, Paraguay and Uruguay, and have a presence in Chile. Further, the Company has entered into license and distribution agreements to produce and sell in Argentina, Bolivia, Chile, Paraguay and Uruguay AmBev and InBev brands. Similarly, under the agreements, AmBev may produce and distribute Quinsa's brands in Brazil. The Company also has bottling and franchise agreements with PepsiCo, and thus accounts for 100% of PepsiCo beverage sales in both Argentina and Uruguay. Quinsa's Class A and Class B shares are listed on the Luxembourg Stock Exchange (Reuters codes: QUIN.LU and QUINp.LU). Quinsa's American Depositary Shares, representing the Company's B shares, are listed on the New York Stock Exchange (NYSE:LQU). Quinsa's web address: http://www.quinsa.com/ Quilmes Industrial (Quinsa) S.A. UNAUDITED CONSOLIDATED PROFIT AND LOSS STATEMENT SUMMARY (US. Dollars in millions, except per share amounts) Six months ended June 30th, 2007 2006 Net sales 621.2 520.4 Cost of goods sold (255.9) (216.0) Gross profit 365.3 304.4 Selling and marketing expenses (130.1) (111.5) Administrative and general expenses (22.3) (21.1) Goodwill amortization (6.4) (7.5) Other operating expenses (net) (7.4) (4.9) Normalized operating profit 199.2 159.4 Income (expense) from sale of fixed assets (0.7) (0.3) Operating profit 198.5 159.1 Interest income 8.9 8.1 Interest expense (21.6) (25.1) Foreign exchange differences (0.6) (1.5) Other non-operating income (expense) net (4.5) (4.9) Earnings (losses) before taxes & minority interest 180.7 135.8 Income taxes (61.7) (43.1) Minority interest (18.8) (15.1) Net income (loss) 100.2 77.6 Net income (loss) per share 0.924 0.716 Net income (loss) per ADR 1.848 1.432 Depreciation and amortization 49.0 47.2 Normalized EBITDA 248.2 206.6 Normalized EBITDA margin 40.0% 39.7% Quilmes Industrial (Quinsa) S.A. UNAUDITED GEOGRAPHIC INFORMATION - SUMMARY (US. Dollars in millions) Six months ended June 30th, 2007 2006 NET SALES Argentina (beer) 231.5 208.5 Argentina (CSD & other) 167.3 133.1 Bolivia 82.5 66.6 Chile 22.1 22.2 Paraguay (beer) 72.1 62.2 Uruguay 32.5 27.8 Interarea sales and other adjustments 13.2 0.0 Total 621.2 520.4 Six months ended June 30th, 2007 2006 Normalized EBITDA Argentina (beer) 107.1 96.7 Argentina (CSD & other) 29.5 20.4 Bolivia 50.5 41.1 Chile (4.1) (2.5) Paraguay (beer) 42.7 35.0 Uruguay 9.0 9.6 Other 13.5 6.3 Total 248.2 206.6 Quilmes Industrial (Quinsa) S.A. UNAUDITED CONSOLIDATED BALANCE SHEET - SUMMARY (US. Dollars in millions) As of June 30th, 2007 2006 ASSETS Cash, Cash Equivalents and Government Securities 333.3 192.9 Inventories 100.8 92.8 Accounts receivable 38.0 28.0 Other Current Assets 48.1 39.1 Total Current Assets 520.2 352.8 Property, Plant and Equipment, Net 634.9 611.8 Goodwill and other intangible assets 326.6 333.9 Long term financial investments 125.4 39.4 Other Assets 108.6 73.2 Total Assets 1,715.7 1,411.1 LIABILITIES AND SHAREHOLDERS' EQUITY Short-Term Bank Debt 165.8 103.9 Long-Term Bank Debt 269.1 256.4 Other Liabilities 461.3 404.9 Total Liabilities 896.2 765.2 Minority Interest 84.2 73.9 Shareholders' Equity 735.3 572.0 Total Liabilities and Shareholders Equity 1,715.7 1,411.1 CONTACT: Guillermo Zuzenberg Quilmes Industrial (Quinsa) S.A. +5411-4349-1846 DATASOURCE: Quilmes Industrial (Quinsa) S.A. CONTACT: Guillermo Zuzenberg, Quilmes Industrial (Quinsa), +011-5411-4349-1846

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