CHILEAN COMPANY FOR CIVIL WORKS AND MORE Quarterly FINANCIAL REPORT december 2014 Construcciones Maquinarias Inmobiliaria Concesiones Energía Renovable MD Montajes Besco (Peru) Kipreos
4besalco group CONSOLIDATED STATEMENT OF EARNINGS (CLP million) December 2014 December 2013 Variation IV Q 2014 IV Q 2013 Variation Ordinary incomes 316,735) 392,301) -19% 69,673) 127,062) -45% Cost of sales (301,575) (364,224) -17% (50,177) (119,365) -58% Gross profit 15,161) 28,077) -46% 19,496) 7,697) 153% Administrative expenses (16,480) (18,412) -10% (4,043) (5,141) -21% Net financial expense (7,186) (4,390) 64% (1,633) (1,436) 14% Net profit in associated companies 611) 5,092) -88% (684) 1,698) -140% Others (1,685) 4,029) 142% (6,344) 4,329) -247% Profit of the period (9,580) 14,396) -167% 6,792) 7,147) -5% Stockholders' profits/loss (11,849) 12,567) -194% 3,921) 5,539) -29% CONSOLIDATED BALANCE SHEET ASSETS (CLP million) December 2014 December 2013 Variation Current assets 416,450) 264,090) 58% Non-current assets 214,375) 262,134) -18% Total assets 630,825) 526,223) 20% LIABILITIES AND EQUITY (CLP million) Current liabilities 324,870) 200,890) 62% Non-current liabilities 136,660) 134,083) 2% Shareholders' equity 160,770) 176,896) -9% Minority interest 8,525) 14,355) -41% Total liabilities and equity 630,825) 526,223) 20% PERFORMANCE OF BESALCO STOCK PRICE (CLP) CLP 1,100 CLP 1,000 CLP 900 CLP 800 CLP 700 CLP 600 CLP 500 CLP 400 Besalco IPSA (indexed to Besalco stock price) CLP 300 CLP 200 jan mar may jul sep nov jan mar may jul sep nov jan mar may jul sep nov jan feb 2012 2013 2014 2015 CLP 100 2
4besalco s.a. The results achieved in the year 2014 present a loss for the shareholders of CLP 11,849 million, unlike the CLP 12,567 million in profits earned in 2013. The company was affected by the negative results obtained by the civil works subsidiary Besalco Construcciones, which had problems in the execution of some contracts, especially in the northern region of the country where the increase in labor costs and inputs coupled with long-term contracts resulted in a loss of CLP 23,707 million. Altogether, the machine services, real estate (in Chile and Peru), energy, assembly and Kipreos subsidiaries recorded a profit of CLP 14,694 million. The losses of Besalco Construcciones had been recorded in the September 2014 financial statement. In the last quarter of the year, this subsidiary showed a profit of CLP 1,641 million, totaling an income of CLP 3,921 million for the Besalco Group companies for this period. The company begins 2015 with an important project portfolio comprising various economic sectors, which is expected will help recover the results obtained in previous years. The backlog balance of works to be executed as of December 2014 is of USD$736 million, from which 52% would be executed during 2015, 23% in 2016, and the remaining balance from 2017 onwards. The duration of the balance of works to be executed amounts to 32 months, where the machine services area contributes the most with longer-term contracts of up to 60 months. The backlog calculation only takes into account ongoing projects and, in the case of consortia, only Besalco s proportional share in the consortium that executes the work is considered. Long-term real estate projects and energy projects which are not yet under construction are also not included. Up to the same date, the company relied on a portfolio of 75 ongoing projects: 36 belong to the civil works area, 11 to real estate area, 23 to machine services area, and 5 to Besco in Peru. STOCK EXCHANGE PRECEDENTS December 2014 December 2013 Stock price (CLP) 350 681 Book value per share (CLP) 279 307 Number of shares (million) 576 576 Equity market value (CLP million) 201,660 392,374 Earnings per share (CLP) -21 22 Price to book value 1.3 2.2 P/E price earning ratio -17.0 31.2 New civil works and construction contracts were awarded in the last quarter of 2014, which include, among others, the principals Metro de Santiago, Municipality of Viña del Mar and Inmobiliaria Penta. RATINGS Fitch-Ratings Feller Rate December 2014 March 2015 Long term debt rating BBB BBB+ Equity rating 2 nd Class Level 3 1 st Class Level 3 Commercial papers N2 / BBB BBB+ / Level 2 Outlook Negative Negative 3
4financial analysis At the end of 2014, the company s financial debt was of CLP 241,555 million, which represents an increase of 11% in relation to the same period in 2013. Ordinary income up to December 2014 stood at CLP 316,735 million, a 19% decrease in comparison to the previous year. In the fourth quarter of 2014 there were profits of CLP 69,673 million, a negative result when compared to the same quarter in 2013 as it showed a decrease of 45%. This decline can be mainly explained due to the income differences of the Construcciones (27%), Inmobiliaria (30%), MD Montajes (36%) and Energía (44%) subsidiaries. However, the remaining subsidiaries reported an increase in their income: Maquinarias (9%), Besco (36%), and Kipreos (60%). In the Financial Statements, the assets and liabilities of the Besalco Energía subsidiaries Aguas del Melado and Eléctrica Portezuelo are recorded in the Assets and Liabilities available for sale accounts, and the profit is recorded in the Profit of Discontinued Operations in the Income Statement. The aforementioned is a result of the sales processes in which those companies are involved. BACKLOG (USD million) 949 900 1,039 954 736 '10 '11 '12 '13 '14 BACKLOG DISTRIBUTION BY MARKET SEGMENT AT SEPT 2014 9% energy 8% health 8% public works direct government contracts TOTAL BACKLOG USD million 18% forestry 3% public works concessions Health 59 Public Works - Direct Government Contracts 59 Public Works - Concessions 19 Copper Mining 140 Mining, other 63 2% transport USD 736 million Other Civil Works 79 Retail 93 Transport 19 Forestry 135 Energy 70 13% retail 19% copper mining TOTAL 736 9% mining, other 11% other civil works 4
47% of the total income is contributed by the civil works and assembly areas, 29% by the machine services area, 15% by real estate developments in Chile and Peru, 2% by investment projects, and the remaining 7% is given by the concessions subsidiary where Besalco S.A. holds different degrees of interest. The cumulative operating income and operating margin as of December 2014 were of 4.8% and 0.4% respectively, while the cumulative margins up to 2013 reached 7.2% and 2.5%. The Ebitda in the year 2014 reached CLP 17,897 million, which represents a 58% decrease in comparison to the same period in 2013. In the last quarter of 2014, this index reached CLP 15,789 million, showing an increase of 19% in relation to the same quarter in 2013. The year 2014 recorded a loss attributable to the shareholders of CLP 11,849 million, which is a negative result compared to the previous period, where profits reached CLP 12,567 million. A comparison between the last quarters of both years shows a profit decrease of 29% for 2014. This situation can be explained by the negative results (CLP 23,707 million) obtained by Besalco Construcciones. In addition, the revenues obtained from the sale of the Norvial concession company in Peru were included in the year 2013. ORDINARY INCOME (CLP Mill) STOCKHOLDERS' PROFITS (CLP Mill) 385,789 392,301 Stockholders' profits (CLP million) Net margin 12,567 127,062 69,673 251,563 321,612 316,736 17,062 19,501 25,617 6.8% 6.6% 6.1% 3.2% 5.6% 4.4% -11,849 5,539 3,921 '10 '11 '12 '13 4Q'13 4Q'14-3.7% '10 '11 '12 '13 '14 4Q'13 4Q'14 '14 5
A comparison of the main items in the income statements between 2014 and 2013 shows the following: _Negative operating result of CLP 1,320 million in 2014 compared to the CLP 9,665 million in profits in 2013. _An increase in net financial expenses from CLP 4,390 million in 2013 to CLP 7,186 million in 2014, which reflects an increase of 63%. _A decrease in the earnings of associates from CLP 5,092 million in 2013 to CLP 612 million in 2014. This result was affected by the CLP 3,338 million loss from the Hospital de Talca Consortium. _An increase in the exchange differences and results stemming from adjustment units accounts from a CLP 2,302 million loss in 2013 to one of CLP 5,905 million in 2014. EBITDA Ebitda (CLP million) Ebitda margin (%) 17,897 46,181 53,583 64,466 42,785 13,271 15,789 18.4% 16.7% 16.7% 22.7% 10.9% 10.4% FINANCIAL DEBT AT DECEMBER 2014 5.7% '10 '11 '12 '13 '14 4Q'13 4Q'14 20% machinery leasing 30% short term banks CLP million Short Term Banks 72,628 CLP 241,556 million Long Term Banks 28,402 LT Public Concessions Projects 27,423 Real Estate Bank Projects 65,365 Machinery Leasing 47,738 TOTAL 241,556 27% real estate bank projects 11% long term public concessions projects 12% long term banks 6
As of December 2014, the total leverage was 2.7 times and the financial leverage was 1.4 times. The company s financial debt at the end of 2014 stood at CLP 241,555 million, which represents an increase of 11% in relation to the same period in 2013. This increase occurred mainly due to a long-term loan requested by Besalco Construcciones during the course of the year, and also because Besalco S.A. has wired bank credit lines to inject funds to said subsidiary through the capitalization of CLP 23,500 million. LEVERAGE Total leverage Financial leverage 2.7 The main composition of the total financial debt is as follows: CLP 30,585 million corresponds to the Construcciones subsidiary, CLP 60,318 million to the Inmobiliaria subsidiary, CLP 52,761 million to the Maquinarias subsidiary, CLP 27,423 million to long-term concession projects, CLP 5,047 million to Besco, and CLP 56,359 million to loans requested by Besalco S.A. The Energía subsidiary does not consolidate a financial debt. 1.3 0.6 1.6 0.8 1.4 0.7 1.1 1.8 1.4 As a result of the negative results obtained by the company and the increase in its level of indebtedness, the Fitch-Ratings and Feller Rate rating organizations modified the long term debt rating of the Besalco S.A. shares to BBB and BBB+, respectively. '10 '11 '12 '13 '14 FINANCIAL DEBT FOR AREA AT DECEMBER 2014 4% other consortia 2% besco (peru) 23% besalco 11% public concessions SUBSIDIARIES 2014 2013 CLP million CLP million Besalco 56,359 33,353 Civil Works 30,585 12,745 Machinery Services 52,761 48,250 Real Estate 60,318 47,350 Energy (*) - 45,621 CLP 241,555 million Public Concessions 27,423 22,398 Besco (Peru) 5,047 4,043 Other Consortia 9,062 4,285 TOTAL 241,555 218,045 (*) Liabilities held for sale. 25% real estate 13% civil works 22% machinery services 7
4construcciones s.a. (civil works) The repair works in Muelle Vergara, the construction works for Metro de Santiago Line 3 and El Remanso project building began this last quarter. By the end of December 2014, Besalco Construcciones held a total of 23 ongoing contracts, from which 11 will be carried out through consortia and 12 will be developed entirely by the subsidiary. At the end of the year, the backlog of the subsidiary stood at USD$238 million, which represents a 32% of the total backlog of Besalco S.A. From this total, it is worth highlighting the works for Ministerio de Obras Públicas [Ministry of Public Works, MOP by its Spanish acronym] with an interest of 25%, as well as the contracts with Metro de Santiago with an 18% of works to be executed. The Aura Observatory project in the IV Region is also present in the backlog with a significant interest of 12%. Its estimated date of completion is set for the last quarter of 2016. BACKLOG (USD million) 379 458 373 223 238 2010 2011 2012 2013 2014 Besalco Construcciones Dec. 2014 Dec. 2013 Variation IV Q 2014 IV Q 2013 Variation Ordinary incomes / CLP million 97,135) 133,479) -27% 17,744) 39,438) -55% Gross profit / CLP million (25,134) (10,374) 142% 3,040) (7,784) -139% Gross mar. less selling exp. (*) / CLP mill. (26,940) (12,120) 122% 2,635) (8,178) -132% Net financial expenses / CLP million (1,587) (820) 94% (613) (679) -10% Profit of the period / CLP million (22,752) (10,777) 111% 2,142) (7,500) -129% Controllers profit/loss / CLP million (23,707) (11,093) 114% 1,641) (7,727) -121% Ebitda / CLP million (25,366) (9,881) 157% 2,888) (7,736) -137% Financial leverage 1.5) 1.8) Liquidity ratio 1.3) 1.0) Total employees 3,439) 3,073) All values according to IFRS standard. (*) Under IFRS it corresponds to Gross Profit less Administration Expenses. The repair works for Muelle Vergara in Viña del Mar and the Civil Works construction of workshops and parking lots for Metro de Santiago Line 3 began at the end of 2014. Together, these works represent a 10% of the subsidiary s total backlog and their completion dates are estimated for December 2015 and April 2016 respectively. Likewise, in November 2014 the subsidiary was awarded the contract for the construction of the El Remanso project building, which represents a 9% of the total backlog. Its completion date is expected for October 2016. In 2014, major budget slippages were recorded during the execution of certain projects mainly in Mall de Copiapó and the Copiapó and Talca hospitals due to the increase in labor costs and the significant and repeated interferences from the principals involved. This situation weighed on the result of the subsidiary, which had a loss of CLP 23,707 million. This loss projection had been acknowledged in the results published in September 2014. In the last quarter of this same year the company showed a profit of CLP 1,641 million. In January 2015, Besalco Construcciones S.A. and Nuevos Desarrollos S.A. signed an agreement in order to establish the final value for the works involved in the Mall Plaza de Copiapó contract. Taking this into account, the loss of the contract amounted to CLP 18,409 million, which had already been acknowledged in previous results. In December 2014 Besalco S.A. increased its assets in CLP 23,500 million, which in total signifies an equity of CLP 20,013 million at the closure of the 2014 financial year. 8
4maquinarias s.a. (machinery services) As of December 2014, the backlog of this subsidiary amounted to USD$352 million, which represents a 48% of the company s total backlog. This subsidiary s line of business comprises the rendering of several services by means of specialized machinery and procedures. These services respond to the needs of the various economic areas where this company operates, such as mining, forestry, and construction, among others. Some examples of these services are the loading and transportation of material for mining, the extraction and comprehensive services required to process the minerals, mechanized forest harvesting, loading and transportation of round wooden posts, gravel transportation, and landfill operations. BACKLOG (USD million) 435 335 519 547 352 2010 2011 2012 2013 2014 Besalco Maquinarias Dec. 2014 Dec. 2013 Variation IV Q 2014 IV Q 2013 Variation Ordinary incomes / CLP million 92,925) 85,189) 9% 13,473) 23,191) -42% Gross profit / CLP million 14,419) 12,965) 11% 3,531) 4,302) -18% Gross mar. less selling exp. (*) / CLP mill. 11,872) 11,141) 7% 3,195) 3,788) -16% Net financial expenses / CLP million (1,476) (875) 69% (131) (278) -53% Profit of the period / CLP million 3,690) 9,174) -60% (2,575) 3,216) -180% Controllers profit/loss / CLP million 3,542) 9,177) -61% (2,705) 3,275) -183% Ebitda / CLP million 24,479) 24,209) 1% 3,394) 7,513) -55% Financial leverage 1.3) 0.6) Liquidity ratio 0.8) 1.1) Total employees 1,573) 1,959) All values according to IFRS standard. (*) Under IFRS it corresponds to Gross Profit less Administration Expenses. At the end of 2014, this subsidiary held 23 active contracts with various clients, mainly in copper mining, salts, forestry, and concrete transportation. There are no contracts with the iron ore mining industry. Ordinary income as of December 2014 showed an increase of 9% in relation to the previous period. However, the profit for this period recorded a decrease of 60%, which is attributed to the work stoppage at Minera Hierro Taltal. To this date, the loss in this respect has been acknowledged. The Ebitda margin for this period reached 26.3%. As of December 2014, the backlog of this subsidiary stood at USD$352 million, which represents a 48% of the company s total backlog. However, a decrease of 36% can be observed if compared to the previous period, which is mainly justified due to the termination of contract with Minera Hierro Taltal, which signified a backlog decrease of approximately USD$93 million. The contracts with the mining industry constitute a 57% of the subsidiary s total backlog. An important part also corresponds to the forestry industry with an interest of 38%. 9
4inmobiliaria s.a. (real estate) The construction of the Centro Lira building in the Santiago district began in the fourth quarter of 2014. In 2014 the registration of deeds in housing amounted to UF 1,510,339, which is a 21% lower compared to the UF 1,918,946 achieved the previous year. The registration of deeds in housing, plus the sale of two strip centers: one in Viña del Mar (part of the Travesía project) and the other in the Chamisero neighborhood, are shown in the total accounting income of 2014. House sales (which are not recorded in the accounting records, only promissory purchase and sale agreements are considered) in 2014 amounted to UF 3,002,509 (768 units), a 32% lower in monetary terms when compared to the year 2013, where UF 2,262,020 (698 units) were sold. Among the projects that contribute the most to the total income of this subsidiary, it is worth mentioning the two stages of the houses built in Haras de San Bernardo, the Las Dalias building in the Providencia district, and the first tower of the Maria Auxiliadora project in the San Miguel district. BACKLOG (USD million) 42 23 35 59 49 2010 2011 2012 2013 2014 Besalco Inmobiliaria Dec. 2014 Dec. 2013 Variation IV Q 2014 IV Q 2013 Variation Ordinary incomes / CLP million 31,020) 44,286) -30% 19,005) 20,017) -5% Gross profit / CLP million 6,265) 7,030) -11% 4,704) 4,102) 15% Gross mar. less selling exp. (*) / CLP mill. 3,795) 4,827) -21% 3,972) 3,521) 13% Net financial expenses / CLP million (1,725) (1,945) -11% (362) (515) -30% Profit of the period / CLP million 1,389) 2,273) -39% 2,874) 2,066) 39% Controllers profit/loss / CLP million 1,512) 2,612) -42% 2,396) 2,209) 8% Ebitda / CLP million 4,505) 5,210) -14% 4,131) 3,534) 17% Financial leverage 2.0) 1.5) Liquidity ratio 2.1) 1.9) Total employees 895) 532) All values according to IFRS standard. (*) Under IFRS it corresponds to Gross Profit less Administration Expenses. Type N N Total sales Sold (UF Thd.) For sale Pre-sales of dwelling projects units (UF Thd.) sales pre sales (UF Thd.) to be closed 2015 ( * ) Housing 7 603 2,833 243 1,693 898 1,624 Apartments 8 925 3,116 403 1,149 1,563 729 Total 15 1,528 5,949 646 2,842 2,461 2,353 (*) Pre-sold units as of December 2014, to be closed 2015. As of December 2014, the total in signed promissory purchase and sale agreements reached UF 2,842,000. From this amount, UF 2,353,000 correspond to projects whose deeds are in the process of being registered or waiting for the municipal use permit. The projects are expected to be recorded as Ordinary Income during 2015. The construction of the Centro Lira building in the Santiago district began in the fourth quarter of 2014 and comprises a 10-floor tower with a total of 276 apartments. As of December 2014, ordinary income reached CLP 31,020 million, a 30% lower than the profits obtained in 2013. The profit attributable to the shareholders reached CLP 1,512 million in December 2014, CLP 2,612 million lower than in 2013. In quarterly terms, as a result of the registration of deeds, the profit of the shareholders amounted to CLP 2,396 million in the fourth quarter. The level of financial debt registers an index of 1.95 times, which is higher to the 1.50 times index shown the previous year. This is due to the significant amount of ongoing works held by the company. 10
4concesiones s.a. (public concessions) The warehouses and offices for the Bodegas Sur Arturo Merino Benítez Airport Building sub-concession are under construction. The completion of works for the Plaza Sucre underground parking lots concession in Viña del Mar is expected for May 2015. The estimated completion date for this work has been delayed due to problems related to service charges and the provision of building land by the Municipality. The warehouses and offices for the Bodegas Sur Arturo Merino Benítez Airport subconcession are under construction. The lease contracts are expected to begin by mid-2015. Banco Consorcio provided the funding for this concession through a project finance type loan with a maturity period of 14 years. The construction of Convento Viejo s third phase consists on the delivery of water to irrigators in stages, in accordance to the work execution process of minor channels. As of last December, approximately 40% of the works had been completed, which means that it is now possible to irrigate 1,000 hectares. An irrigation covering 4,600 hectares is expected by mid- 2015, for a total supply of 21,000 hectares estimated for April 2017. The loss attributable to the shareholders amounted to CLP 1,366 million, which was influenced by the negative results obtained by the Plaza Las Condes and Constructora CBA concessionaries, and positively affected by the profits generated by the Sociedad Concesionaria Convento Viejo (CLP 627 million) and the Sociedad Concesionaria BAS (CLP 318 million). plaza las condes (100%) Concession term 35 years Concession start up 2007 Operation start up 2009 Concession termination 2042 Total investment (UF) 519,066 Equity book & partners' subordin. debt (UF) 60,972 Value per DCF (UF) 273,000 plaza sucre (100%) Concession term 29 years Operation start up June 2015 Concession termination July 2039 Total investment (UF) 625,673 Equity book (UF) 131,000 sociedad concesionaria convento viejo (33.3%) Concession term 25 years Operation start up (Stage I) 2008 Concession termination 2030 Total investment (UF) 5,751,340 Investment to the date (UF) 4,832,305 Subsidy incomes 2 nd semester 2014 (UF) 426,000 Equity book (UF) 543,082 Value per DCF (UF) / 100% of the company 777,000 sociedad concesionaria bas (33.3%) Concession term 20 years Operation start up 2006 Concession termination 2026 Total investment (without "claim") (UF) 3,450,000 Sub. construction incomes 2 nd sem. 2014 (UF) 274,950 Sub. operating incomes 2 nd sem. 2014 (UF) 358,251 Average internal N December 2014 6,045 Equity book (UF) 924,793 Value per DCF (UF) / 100% of the company 523,000 We present the valuations of concessions where Besalco Concesiones S.A. owns an interest. Given the difficulty in conveying the information needed to project the cash flows for each concession to the market, we release our estimated market value for each concession in the following tables under Value per DCF in the local UF currency. It is obtained through the discounted cash flow (DCF) valuation method. An actual annual and UF-based rate is used, with an annual 1.65% risk-free interest rate, an annual risk premium of 5.5%, and a 0.99 beta. Therefore, the dividend discount rate employed is UF + an annual 7.1%. The aforementioned values do not constitute an offer to sell from these companies. 11
4energía renovable s.a. (renewable energy) Los Hierros II, the second power plant put in operation by Besalco, is supplying power to the SIC. Energía Renovable Dec. 2014 Dec. 2013 Variation IV Q 2014 IV Q 2013 Variation Ordinary incomes / CLP million 2,751) 4,874-44% 310) 4,466-93% Gross profit / CLP million 1,406) 1,047 34% 33) 1,010-97% Gross mar. less selling exp. (*) / CLP mill. 772) 341 126% (166) 738-122% Net financial expenses / CLP million (615) 36-1,809% (214) 389-155% Profit of the period / CLP million 1,526) 405 276% (587) 1,089-154% Controllers profit/loss / CLP million 1,526) 405 277% (587) 1,089-154% Ebitda / CLP million 3,013) 370 713% (1,360) 743-283% Financial leverage -) 4.5 Liquidity ratio 1.0) 0.4 Total employees 88) All values according to IFRS standard. (*) Under IFRS it corresponds to Gross Profit less Administration Expenses. In January, the first trials to provide power to both the electric substation and the power generation unit Los Hierros II (5.5 MW), as well as the first synchronization of turbines with the Central Interconnected System [Sistema Interconectado Central, SIC by its Spanish acronym] were carried out. Today, the power plant supplies power to the SIC trouble-free. This power plant is the second one the company has put into operation inside the El Melado complex, which uses the water from the El Melado irrigation channels, and considers the construction and operation of three other power plants with a total of 32 MW. MARGINAL COSTS USD/MWh - SUBSTATION ANCOA 220KV (SPOT PRICE) jan mar may jul sep nov jan mar may jul sep nov jan USD/MWh 2013 2014 2015 250 225 200 175 150 125 100 75 50 25 0 Eléctrica Aguas del Melado, which controls the Los Hierros power plant, supplied a total of 110 GWh to the SIC during the first year at the electrical system s marginal cost, so-called spot. The graph shows the monthly average variation that this price has suffered, which indicates a good production pace, taking into account it corresponds to its first year of operation. The production is expected to reach 145 GWh in the years to come. There has been a reclassification, due to the sales process, of all the assets and liabilities of the Empresa Eléctrica Aguas del Melado S.A. and Empresa Eléctrica Portezuelo S.p.A. subsidiaries, under the item Assets and Liabilities available for sale. This was done in September 2014 with a total amount of CLP 83,171 million in assets available for sale. The parent company of these companies is Besalco Energía Renovable S.A., which presented an annual income of CLP 2,751 million corresponding to operation and maintenance contracts with its subsidiaries. At the same time, the company had discontinuous profits of CLP 2,194 million stemming from the operation of Los Hierros up to September 2013, before the deconsolidation. 12
4md montajes s.a. (industrial constructions) 4(60% besalco) Nowadays, this subsidiary is actively studying several proposals, both in the public and private sectors, mainly in the mining, port and energy areas. This subsidiary focuses its activities on different business areas, standing out in the mining sector, the cellulose industry, water treatment and the assembly of infrastructure, among others. The subsidiary has a specialized staff with vast experience in the market. At the end of the 2014 period, this subsidiary held a balance of USD$4 million of works to be executed, which correspond to the Habilitación Chimenea ex Horno Reverbero [Modification of the former Reverbero Furnace Chimney], carried out for Codelco s El Salvador division. This project registered an 11% progress by the end of the quarter and its estimated completion date is May 2015. However, there are ongoing negotiations per the principal s request in order to modify the scope of the contract so as to include new works. BACKLOG (USD million) 8 38 14 8 4 2010 2011 2012 2013 2014 Besalco MD Montajes Dec. 2014 Dec. 2013 Variation IV Q 2014 IV Q 2013 Variation Ordinary incomes / CLP million 23,042 36,113-36% 1,253 11,910) -89% Gross profit / CLP million 6,257 4,349 44% 1,498 2,144) -30% Gross mar. less selling exp. (*) / CLP mill. 4,512 2,939 53% 1,095 1,863) -41% Net financial expenses / CLP million 130 179-27% 89 (17) -622% Profit of the period / CLP million 2,763 2,680 3% 989 1,535) -36% Controllers profit/loss / CLP million 2,763 2,680 3% 989 1,535) -36% Ebitda / CLP million 3,422 3,318 3% 1,111 1,893) -41% Financial leverage - 0.2 - Liquidity ratio 6.3 1.8 0.0 Total employees 78 1,399 All values according to IFRS standard. (*) Under IFRS it corresponds to Gross Profit less Administration Expenses. The decrease in the company s backlog occurs due to the strong link between the activity of the subsidiary and the mining industry. Taking into account the current market conditions, the project load has followed the mining sector s tendency, therefore, it has slowed down and there has been an extension of the study and tendering periods. In this period, Besalco MD Montajes reached an agreement with a foreign company in order to participate in the tender for the works of a mining project located in the I Region of the country. This agreement comprises the execution of civil works and electromechanical assembly. The works are expected to begin in the year 2016, once the project s environmental proceedings are completed. By the end of the quarter, Besalco MD Montajes had been actively studying several proposals, both in the public and private sectors. It holds offers for mining, port and renewable energy projects for an estimated amount of USD$145 million. This subsidiary is waiting on the execution and awarding decision of the projects principals. As of December 2014, ordinary income decreased 36% in relation to the previous year, reaching an income of CLP 23,042 million. However, the gross profit increased 44% from CLP 4,349 million to CLP 6,257 million which signifies a good quarterly gross margin. The accumulated Ebitda up to December 2014 was CLP 3,422 million, which corresponds to a 3% increase in relation to the one obtained in 2013. The profit of the shareholders in 2014 increased 3%, from CLP 2,680 million in 2013 to CLP 2,763 million in 2014. An analysis of the different quarters shows that there was a CLP 989 million profit in the fourth period of 2014, which is lower than the one obtained during the same period of the previous year, where it amounted to CLP 1,535 million. At the end of 2014, the company had a high liquidity 6.3 times, which allows it to operate without financial debt and to comfortably face new projects. 13
4besco s.a. (peru) Besalco Peru a direct subsidiary of Besalco S.A. was recently founded in order to study and execute infrastructure works for the private sector. BACKLOG (USD million) This company celebrates a good year in the construction and sale of family apartments. It has been in this business for 12 years and it has become a relevant actor in the real estate sector in Lima, along with an ongoing expansion in the city of Piura. 38 29 A record quantity of apartments were sold during the year in different projects. Some of them are in the promotion and selling stages, while others are in the final stages of construction and delivery. Besco develops its own projects as well as projects through consortia. Its own projects are Central 10.5, Nuevo Alcázar, Zafiro-Barranco, Los Prados Chaclacayo and Condominio Villa Santa Clara, with a total of 2,240 apartments. Those developed through consortium are Parque Central and Alameda Santa Ana de Piura, with a total of 2,376 apartments. 19 12 22 2010 2011 2012 2013 2014 Besco (Peru) Dec. 2014 Dec. 2013 Variation IV Q 2014 IV Q 2013 Variation Ordinary incomes / CLP million 16,319) 12,019) 36% 9,388) 6,106) 54% Gross profit / CLP million 4,103) 4,445) -8% 1,627) 2,528) -36% Gross mar. less selling exp. (*) / CLP mill. 2,488) 2,243) 11% 1,094) 1,264) -13% Net financial expenses / CLP million (88) (70) 26% (28) (22) 29% Profit of the period / CLP million 2,906) 8,689) -67% 628) 6,655) -91% Controllers profit/loss / CLP million 3,054) 8,764) -65% 716) 6,670) -89% Ebitda / CLP million 3,800) 10,213) -63% 1,092) 1,620) -33% Financial leverage 0.3) 0.2) Liquidity ratio 2.1) 1.9) Total employees 295) 137) All values according to IFRS standard. (*) Under IFRS it corresponds to Gross Profit less Administration Expenses. The mega-project Parques de Comas, a joint venture with the Graña & Montero company, was launched for sale and entails the construction of 10,624 apartments with Techo Propio [Own Roof] and Mi Vivienda [My House] type of subsidies. The first delivery of sold apartments will be done towards the end of 2015. Besalco Peru a direct subsidiary of Besalco S.A. was recently founded in order to study and execute infrastructure works for the private sector. It is currently participating in some tenders. Ordinary income in 2014 was of CLP 16,319 million, which shows a 36% increase in relation to the one obtained during the same period the previous year. This significant increase is a result of the company s varied projects and to the significant extent of real estate sales, despite the slowdown of the market in general. Meanwhile, the profit of the shareholders amounted to CLP 3,054 million during the year, CLP 2,511 million higher than the one generated in 2013 by real estate activity, without taking into account the revenues from the sale of Norvial s shares. All of the financial indexes for the fourth quarter of 2014 were superior to the ones in previous periods, due to the concentration in the delivery of apartments and their subsequent inclusion in the accounting records of the period. 14
4kipreos (civil works for energy transmission) As of December 2014, the registered backlog was of USD$70 million, which comprises air service contracts and the installation of high voltage transmission lines, among others. BACKLOG (USD million) 77 75 70 Kipreos is a constantly growing subsidiary. At the end of the 2014 period, it held 12 existing contracts a total of USD$70 million to be executed which included the construction of high and low voltage transmission lines, contracts for the installation of lines for real estate construction companies and transportation services for hard-to-access areas. Its clients include companies such as Eletrans S.A., Constructora Avellaneda, Transnet, and Onemi, among others. 10 2011 2012 2013 2014 kipreos ingeniería (68% besalco) kipreos aéreos (68% besalco) Kipreos Dec. 2014 Dec. 2013 Variation IVQ 2014 Dec. 2014 Dec. 2013 Variation IVQ 2014 Ordinary incomes / CLP million 29,345) 18,334) 60% 6,308 879) 1,710) -49% 221) Gross profit / CLP million 4,646) 3,016) 54% 1,620 190) 494) -62% 143) Gross mar. less selling exp. (*) / CLP mill. 3,116) 1,737) 79% 1,210 92) 276) -67% 121) Net financial expenses / CLP million (55) (33) 67% 5 (9) (8) 21% (1) Profit of the period / CLP million 2,208) 1,216) 82% 855 88) 220) -60% 51) Controllers profit/loss / CLP million 2,208) 1,216) 82% 855 88) 220) -60% 51) Ebitda / CLP million 3,900) 2,164) 80% 1,572 222) 496) -55% 121) Financial leverage 0.2) 0.0) 0.1) 0.1) Liquidity ratio 1.3) 1.7) 1.8) 1.6) Total employees 625) 748) 21) 24) All values according to IFRS standard. (*) Under IFRS it corresponds to Gross Profit less Administration Expenses. The second circuit of the Cardones-Diego de Almagro Line contract whose principal is Eletrans S.A. started its execution during the fourth quarter of 2014. It comprises the installation of high voltage transmission lines that will connect the Cardones and Diego de Almagro substations in the III Atacama Region. The completion date is set for May 2016. This contract, which is adjusted to Besalco s interest, has a USD$13 million balance left to be executed, which represents a 19% of the total backlog of the subsidiary. At the end of the 2014 period, the bidding process for the second circuit for the line that connects the Ciruelos and Pichirropulli substations in the XIV Los Rios Region was still in process, and its execution date is estimated to last 11 months. Since the installation of high voltage transmission lines is Kipreos most important activity, at the end of the year this subsidiary was still studying projects and presenting proposals related to the mining, energy, and civil works sectors. Operating income for Kipreos Ingenieros increased by 60% in relation to the one obtained the previous period and, at the same time, it presents a 54% increase in gross income. The period s profit increased by 82%, while the Ebitda reached CLP 3,900 million, which represents an 80% increase in comparison to the same previous period. 15