/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/030502.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Friday, May 2, 2003, Vol. 4, Issue 86 Headlines A R G E N T I N A ACINDAR: Fitch Rates Corporate Bonds `D(arg)' ARGENTINE BANKS: Fitch Comments on Trends & Challenges INVERSIONES DE ENERGIA: Bonds Get Default Ratings From S&P SIDECO AMERICANA: Fitch Assigns `D(arg)' To Corporate Bonds B E R M U D A GLOBAL CROSSING: ST Telemedia Angles for Hutchinson Deal GLOBAL CROSSING: Seeks To Limit Trustee's Indemnification Claims TYCO INTERNATIONAL: Reports Second Quarter Loss of US$0.23/Share B R A Z I L ELETROPAULO METROPOLITANA: AES To Continue Talks With BNDES IDEIASNET: To Make Acquisitions In Biotech, Telecoms Industries TELEMAR: HP Brasil Rumored To Acquire Tnext VARIG: Controllers Mulling Government's Planned Takeover C H I L E AES CORP.: May Use Dividends To Pay Interest On Debt With Unit ENERSIS: ENDESA Reports First Quarter 2003 Consolidated Results C O L O M B I A AVIANCA: Judge Extends Authorization For Interim DIP Loan AVIANCA: Unsecured Creditors Committee Defends Ch. 11 Filing M E X I C O CINTRA: Reports First Quarter 2003 Results DESC: 1Q03 Results Show Improvement GRUPO MEXICO: First Quarter 2003 CEO Report GRUPO MINERO MEXICO: Fitch Ratings Affirms SENs Ratings SAVIA: 1Q03 Numbers Show Better Revenues, Margins SAVIA: Shareholders Approve Sale of Seminis SIDEAPA: Moody's Assigns `Ba3.mx' National Scale Rating UNEFON: Posts Bigger Net Loss In The 1Q03 T R I N I D A D & T O B A G O BWIA: SE Grants Deadline Extension on 2002 Annual Report Filing U R U G U A Y BBVA URUGUAY: S&P Affirms Local, Foreign Currency Credit Ratings CITIBANK N.A.: S&P Revises Outlook on Currency Credit Ratings DISCOUNT BANK: S&P Affirms `CCC' Currency Credit Ratings V E N E Z U E L A * Venezuela Plans Reduction of Private Debt Placement - - - - - - - - - - ================= A R G E N T I N A ================= ACINDAR: Fitch Rates Corporate Bonds `D(arg)' --------------------------------------------- Corporate bonds of Acindar Industria Argentina de Aceros were rated `D(arg)' by Fitch Argentina Calificadora de Riesgo, S.A. said the National Securities Commission. The rating, issued on Thursday, was assigned to bonds described as "Obligaciones Negociables simples, no convertibles en acciones, autorizadas or y AGOyE de fecha 5.8.96", worth US$100 million. The bonds were classified under `Simple Issue', and will mature on February 16, 2004. Fitch based the rating on the Company's financial health as of December 31, 2002. The ratings agency said that the rating is assigned to entities that are currently in default. The Company's main activity is the production of non-flat steel products such as steel pipe, cable, hot-rolled and cold-drawn steels for concrete, forged bars and blocks for distributors of steel products, other steel companies, manufacturers of original equipment for several industrial sectors including the automotive and the oil and gas industries and end users, mainly in the construction and agricultural sectors of the economy. Its principal market is Argentina, although it exports its products to Brazil, Chile and the United States, Bolivia and Uruguay through its sales office. CONTACT: Acindar Industria Argentina de Aceros SA 2739 Estanislao Zeballos Beccar Buenos Aires Argentina B1643AGY Phone: +54 11 4719 8500 Fax: +54 11 4719 8501 Home Page: http://www.acindar.ar.com Contact: Arturo Tomas Acevedo, Chairman ARGENTINE BANKS: Fitch Comments on Trends & Challenges ------------------------------------------------------ In a report published Tuesday, Fitch Ratings commented on the trends and challenges facing the Argentine banking system. Nearly a year and a half has passed since the onset of the Argentine banking crisis and while there have recently been some positive developments in the sector as a result of a relative stabilization of many economic variables and sustained deposit growth since mid-2002, considerable uncertainties in the macroeconomic environment and the banking sector have impeded the sector from restoring normal operations. Specifically, banking sector normalization continues to be stalled by the government's failure to define its stance on bank compensation and until recently, the uncertainty created by the threat of deposit re- dollarization, which have prohibited an accurate quantification of bank losses associated with the crisis. While the burden of re-dollarizing the remaining restructured deposits has largely been assumed by the government in a recently approved decree, Fitch believes that it will be some time before many of the other issues are resolved, pushing the banking system's recovery and, therefore, its ability to play an active role in supporting the credit necessary for sustainable growth, out further into the future. In response to the high degree of uncertainty, most banks have adopted defensive strategies aimed at building and preserving liquidity, while traditional banking business remains at a standstill. With few exceptions, banks have ceased lending activities, focused on loan collections and used deposit inflows to further boost liquidity cushions. In order to improve profitability, banks have been cutting costs, primarily through staff and branch reductions. Revenue growth, however, has been a more difficult task given structural mismatches imposed by regulations and the prioritization of liquidity. Most banks plan to develop their transactional business, capitalizing on the increase in fee-based products that accompanied the cash restrictions as consumers were forced to use their debit and credit cards for purchases. The time line for bank recovery will be largely dependent upon the progress made by the next administration. There are incentives for prompt action on bank restructuring, such as its importance to economic stability as well as its inclusion as a requirement in the recently signed IMF program. However, to date, clear policy proposals in this respect have not been made. What does seem clear now, is that the shape and role of the banking system within the Argentine economy will change substantially. The road to recovery will certainly include significant consolidation, reducing, perhaps significantly, the number of banks in the system, a process that is already underway. While depositor confidence may be seen to have recovered somewhat, it will remain scarred well into the future due to the recent events. The robust expansion of the deposit base seen in the second half of the 1990's will likely not be seen again for some time. Indeed it seems likely that at least some of the current 'stickiness' of deposits is thanks to the combination of unsustainably high interest rates being offered by the banks, and the fact that, in the absence of fresh lending by the banks, working capital is being provided by these deposits and by some return of funds that escaped the system prior to 2002. The system seems fated to evolve into a largely transactional system, with savings lodged at institutions beyond Argentina's borders, and the role of banks in Argentina reduced to a transactional one, providing basic banking services and housing little more than the cash necessary for the short term operations of economy. Fitch expects that its rating activities will be largely focused on national ratings in the near future. In applying its rating methodology in these activities, Fitch will pay particular attention to the bank liquidity, the regulatory environment, and the business strategies that banks will follow as they navigate the turbulent times ahead. INVERSIONES DE ENERGIA: Bonds Get Default Ratings From S&P ---------------------------------------------------------- Standard & Poor's International Ratings, Ltd. Sucursal Argentina moved Compania de Inversiones de Energia, S.A.'s corporate bonds into junk territory. The National Securities Commission of Argentina indicated that some US$220 million of corporate bonds described as "Obligaciones Negociables Autorizadas por AGE de fecha 13.12.96" were rated `raD' on Monday. S&P said that an obligation is rated `raD' when it is payment default or the Company has filed for bankruptcy. The `raD' rating is used when interest or principal payments are not made on the date due, even if the applicable grace period has not expired, unless the ratings agency believes that such payments will be made during such grace period. The rating was based on the Company's financials as of the end of December 2002. The affected bonds were classified under "Simple Issue", and matured in April last year. SIDECO AMERICANA: Fitch Assigns `D(arg)' To Corporate Bonds ----------------------------------------------------------- Corporate bonds of Sideco Americana S.A. were given junk ratings on Thursday, said the National Securities Commission of Argentina. Fitch Argentina Calificadora de Riesgo S.A. assigned `D(arg)' to US$200 million worth of bonds described as "Obligaciones Negociables", classified under "program." The bonds matured in June 2000. Fitch said that the rating, which is given to entities that are currently in default, was based on the Company's financial standing as of December 31, 2002. ============= B E R M U D A ============= GLOBAL CROSSING: ST Telemedia Angles for Hutchinson Deal -------------------------------------------------------- Global Crossing and Singapore Technologies Telemedia Pte. Ltd. (ST Telemedia) announced Wednesday that ST Telemedia would assume the rights and obligations of Hutchison Telecommunications Limited (Hutchison) to invest in Global Crossing under the purchase agreement signed August 9, 2002. ST Telemedia will increase its original investment under the purchase agreement from $125 million to a total $250 million for 61.5 percent ownership interest in the reorganized Global Crossing upon its emergence from Chapter 11. Emergence is expected in coming months, subject to obtaining anticipated regulatory approvals. Hutchison announced Wednesday that it has decided to withdraw from the Global Crossing purchase agreement. The agreement, which was approved by the United States Bankruptcy Court for the Southern District of New York on August 9, 2002, allows either investor to take over the investment opportunity of the other on such a withdrawal. ST Telemedia has decided to assume Hutchison's 30.75 percent stake in the reorganized Global Crossing. "ST Telemedia will be an ideal partner for us and will bolster Global Crossing's position as a leading provider of next generation telecommunication services on a global scale," said John Legere, Global Crossing's CEO. "As an innovative information and communications company having both financial strength and an aggressive growth plan, ST Telemedia clearly stands out as an investor that is complementary to Global Crossing's vision and mission." The actions taken Wednesday by ST Telemedia and Hutchison will not change distributions to creditors under Global Crossing's Chapter 11 Plan of Reorganization, which was accepted by creditors and confirmed by the Bankruptcy Court in December 2002. "We are enthusiastic about Global Crossing's future," said Lee Theng Kiat, president and CEO of ST Telemedia. "This transaction will help ensure that the company and its employees continue to provide world class telecommunications service to customers around the world." "We're grateful for Hutchison's interest in Global Crossing and for the flexibility they exercised in adapting to the circumstances of the investment proposal," added John Legere. "We wish Hutchison much success in continuing to push the frontier of telecommunication services, where they have already established a distinguished track-record through their worldwide investments." ABOUT GLOBAL CROSSING Global Crossing provides telecommunications solutions over the world's first integrated global IP-based network, which reaches 27 countries and more than 200 major cities around the globe. Global Crossing serves many of the world's largest corporations, providing a full range of managed data and voice products and services. On January 28, 2002, Global Crossing Ltd. and certain of its subsidiaries (excluding Asia Global Crossing and its subsidiaries) commenced Chapter 11 cases in the United States Bankruptcy Court for the Southern District of New York (Bankruptcy Court) and coordinated proceedings in the Supreme Court of Bermuda (Bermuda Court). On the same date, the Bermuda Court granted an order appointing joint provisional liquidators with the power to oversee the continuation and reorganization of the Bermuda-incorporated companies' businesses under the control of their boards of directors and under the supervision of the Bankruptcy Court and the Bermuda Court. Additional Global Crossing subsidiaries commenced Chapter 11 cases on April 23, August 4 and August 30, 2002, with the Bermuda incorporated subsidiaries filing coordinated insolvency proceedings in the Bermuda Court. The administration of all the cases filed subsequent to Global Crossing's initial filing on January 28, 2002 has been consolidated with that of the cases commenced on January 28, 2002. Global Crossing's Plan of Reorganization, which was confirmed by the Bankruptcy Court on December 26, 2002, does not include a capital structure in which existing common or preferred equity will retain any value. On November 18, 2002, Asia Global Crossing Ltd., a majority-owned subsidiary of Global Crossing, and its subsidiary, Asia Global Crossing Development Co., commenced Chapter 11 cases in the United States Bankruptcy Court for the Southern District of New York and coordinated proceedings in the Supreme Court of Bermuda, both of which are separate from the cases of Global Crossing. Asia Global Crossing has announced that no recovery is expected for Asia Global Crossing's shareholders. Asia Netcom, a company organized by China Netcom Corporation (Hong Kong) on behalf of a consortium of investors, has acquired substantially all of Asia Global Crossing's operating subsidiaries except Pacific Crossing Ltd., a majority-owned subsidiary of Asia Global Crossing that filed separate bankruptcy proceedings on July 19, 2002. Global Crossing no longer has control of or effective ownership in any of the assets formerly operated by Asia Global Crossing. Please visit www.globalcrossing.com for more information about Global Crossing. ABOUT SINGAPORE TECHNOLOGIES TELEMEDIA Singapore Technologies Telemedia (ST Telemedia) is a leading information and communications company in Singapore and the Asia- Pacific region. Incorporated in 1994, the company provides a wide range of services including fixed and mobile telecom, wireless data communications, Internet mobile, managed hosting and IP network, satellite, cable TV, enhanced broadband and multimedia. ST Telemedia also is a major shareholder in Singapore's second largest telecommunications company, StarHub; Indonesia's second largest telecommunications operator, PT Indosat; and Equinix Inc., a company providing Internet exchange and infrastructure services across the United States and Asia-Pacific. ST Telemedia is a subsidiary of the Singapore Technologies Group, a technology-based multinational with operations and interests in more than 20 countries, including the United States. The Group has U.S. investments in Alabama, Arizona, California, Massachusetts, North Carolina, Texas, and Virginia. For more information on ST Telemedia, please visit www.stt.st.com.sg CONTACT: GLOBAL CROSSING Press Contacts Becky Yeamans + 1 973-937-0155 Rebecca.Yeamans@globalcrossing.com Tisha Kresler + 1 973-937-0146 Tisha.Kresler@globalcrossing.com Kendra Langlie Latin America +1 305-808-5912 Kendra.Langlie@globalcrossing.com Mish Desmidt Europe + 44 (0) 7771-668438 Mish.Desmidt@globalcrossing.com Analysts/Investors Contact Ken Simril +1 310-385-3838 investors@globalcrossing.com CONTACT: ST TELEMEDIA Press Contacts in Singapore Melinda Tan +65 (6723) 8690 tanmelinda@stt.st.com.sg June Seah +65 (6723) 8683 june_seah@stt.st.com.sg Press Contacts in North America Bill Maroni +1 202-585-2753 wmaroni@webershandwick.com Haidee Schwartz +1 202-585-2098 hschwartz@webershandwick.com GLOBAL CROSSING: Seeks To Limit Trustee's Indemnification Claims ---------------------------------------------------------------- Bermuda-based Global Crossing and the creditors committee requested the bankruptcy court to limit the amount of Wilmington Trust's indemnification claims to reasonable costs and expenses the trustee may incur while defending itself against the ad hoc committee's allegations, according to a Dow Jones article. Wilmington Trust, which is also a member of the creditor's committee, is the principal subsidiary of Wilmington Trust Corp. (WL), and is the successor trustee to JP Morgan Chase Bank. Global Crossing's motion indicated that Wilmington Trust and JP Morgan Chase Bank's indemnification claims "should be estimated at zero" because these were "highly speculative." Dow Jones added that Global Crossing and the creditors committee seeks to avoid any lien in favor of Wilmington trust that calls for payment to the trustee, which would in turn be distributed to noteholders of Global Crossing-owned Frontier Corporation. The Frontier notes make up approximately 80 percent of the note claims against Global Crossing subsidiary Global Crossing North America Inc., according to court papers. All payments on behalf of the noteholders are to be made to Wilmington Trust, which would then make distributions to noteholders. However, the lawsuit indicated, an ad hoc committee of Frontier noteholders have made allegations of misconduct against Wilmington Trust. The same committee reportedly accused JP Morgan Chase Bank of the same violation. JP Morgan allegedly "failed to properly protect the interests of the Frontier noteholders with respect to a US$3 billion senior bank credit facility." Global Crossing's restructuring plan stipulates that holders of Global Crossing North America are to receive a combination of cash, senior secures notes, new common stock and an interst in liquidation trust, which total at least US$16 million. In the meantime, Global Crossing is maintaining the exclusivity of its reorganization plan as it awaits approval from the concern agencies. CONTACT: GLOBAL CROSSING Press Contacts Becky Yeamans Phone: + 1 973-410-5857 E-mail: Rebecca.Yeamans@globalcrossing.com Kendra Langlie Latin America Phone: + 1 305-808-5912 E-mail: Kendra.Langlie@globalcrossing.com Mish Desmidt Europe Phone: + 44 (0) 7771-668438 E-mail: Mish.Desmidt@globalcrossing.com Analysts/Investors Contact Ken Simril Phone: + 1 310-385-3838 E-mail: investors@globalcrossing.com TYCO INTERNATIONAL: Reports Second Quarter Loss of US$0.23/Share ---------------------------------------------------------------- Tyco International Ltd. (NYSE: TYC, BSX: TYC, LSE: TYI) reported on Tuesday a loss from continuing operations of 23 cents per share for its second quarter, compared to a loss from continuing operations of $1.03 for the same period last year. Charges totaled 55 cents per share in the quarter second quarter cash flow well above expectations. -- Second quarter 2003 results included 55 cents per share in after-tax charges related to primarily non-cash adjustments arising out of the Company's ongoing program of intensified internal audits and detailed controls and operating reviews, a change to an accelerated amortization method for its ADT dealer program account assets, and a change in the accounting for the connect fee associated with ADT's dealer program. -- Second quarter 2002 results from continuing operations included $1.53 per share in after-tax net charges related primarily to the impairment of the Tyco Global Network, the write-down of investments, and restructuring charges associated with the downturn in the electronics and telecommunications sectors. Earnings per share from continuing operations for the six months ended March 31, 2003 were 8 cents per share, including 55 cents related to the charges noted above. For the six months ended March 31, 2002 the loss from continuing operations was 56 cents per share, including $1.65 related to the charges noted above. See the discussion below and the accompanying tables to this release for a more detailed description of these items by category and by segment. Revenues for the second quarter 2003 were $9.0 billion, up 4% from $8.6 billion in the second quarter of last year, reflecting favorable changes in foreign currency rates. For the six months ended March 31, 2003 revenues were $17.9 billion, a 4% increase over the same period last year due to favorable changes in foreign currency rates. Cash flow from continuing operating activities was $1.4 billion in the quarter and $2.2 billion for the six months ended March 31, 2003, compared to $1.7 billion and $2.7 billion during the same periods in 2002, respectively. -- The Company changed its definition of "free cash flow" in March 2003. Under the Company's current definition, second quarter 2003 free cash flow was $833 million, or 47% above the $568 million in the same period in 2002. For the six months ended March 31, 2003, free cash flow was $967 million compared to negative $205 million for the same period in 2002. -- Under the Company's prior definition, free cash flow was $1.1 billion in the second quarter 2003, compared to $1.0 billion in the same period in 2002. Free cash flow for the six months ended March 31, 2003 was $1.5 billion compared to $850 million in the same period in 2002. ("Free cash flow" is a non-GAAP metric used by the Company to measure its ability to meet its future debt obligations, and is also one component of measurement used in the Company's compensation plans. See the accompanying table to this press release for a cash flow statement presented in accordance with GAAP, and a reconciliation presenting the components of free cash flow.) "Our cash flow this quarter was well ahead of what we projected, demonstrating the underlying strength of our businesses, as well as improvements in the collection of receivables and the management of inventory." said Chairman and CEO Ed Breen. "And even though we're operating in an economically challenging environment, operationally our businesses delivered revenues and segment results in line with the ranges discussed at our March 13, 2003 Investor meeting." ACCOUNTING ITEMS The charges arising out of the Company's ongoing program of intensified internal audits and detailed controls and operating reviews were $997.4 million pre-tax. This includes the $265 million to $325 million range of anticipated charges announced on March 13th. Approximately 52% of the charges are the result of applying management's judgment to estimates of reserves, accruals and valuations of investments. The remaining 48% is attributable to account reconciliation discrepancies, inappropriate capitalization of expenses and other accounting adjustments, of which 44% relate to prior periods from 1997 through the first quarter of fiscal 2003. Approximately 60% of the total charges related to the Fire and Security segment and 20% to Engineered Products and Services. The Company also recorded a charge of $364.5 million pre-tax to reflect a change in the method of amortization used for ADT dealer program account assets. The Company has adopted an accelerated approach, based on a 200% declining balance, as opposed to the 10 year straight line method previously in place. The Company has also adopted the newly issued EITF 02-16, which requires that the connect fee associated with ADT's dealer program be recognized as a reduction of the dealer asset account as opposed to a reduction in costs associated with the program. The impact associated with this change in accounting is recorded as a cumulative charge of $206.7 million after-tax as of October 1, 2002, $12 million pre-tax for the first quarter of fiscal 2003 and $7 million pre-tax in the second quarter of fiscal 2003. The Company's continuing reexamination of the dealer program assets and connect fee was part of management's evaluation of this business as well as the ongoing process of responding to the SEC's Division of Corporation Finance inquiries regarding the dealer program. The Company has not completed its discussions with the SEC on these matters or the other accounting items announced today. The Company, with the concurrence of its external auditors, believes that all of the charges announced today, coupled with those set forth in the Company's Annual Report on Form 10-K for fiscal 2002, are not material individually or in the aggregate to any prior year, and therefore, do not require a restatement of previously disclosed operating results. The Company cannot predict the outcome of its discussions with the SEC or that such outcome will not necessitate further amendments or restatements of the Company's results of operations. The Company hopes to resolve all issues raised by the ongoing SEC Division of Corporation Finance review during its fiscal third quarter. "I am disappointed that our intensified internal audit and review efforts have identified additional charges, but I believe at this point we have identified all, or nearly all, legacy accounting issues," Mr. Breen said. "We have completed balance sheet reviews for all of our 2,154 accounting entities, and completed on-site verification of these reviews covering the vast majority of our assets. Additionally, the issues we have identified are almost entirely non-cash." QUARTERLY OPERATING RESULTS The segment profits and margins presented in the tables below are in accordance with generally accepted accounting principles (GAAP). These profits and margins include the charges discussed above. See the tables accompanying this release for a classification of the charges by segment. Tyco Plastics and Adhesives is presented as a separate reportable segment for all periods. In fiscal 2002, its results were included in the Healthcare and Specialty Products segment. Restated segment results by quarter for fiscal 2002 are available at www.tyco.com. All dollar amounts are stated in millions. Electronics March 31, 2003 March 31, 2002 Segment revenues $2,502.0 $2,493.9 Segment profit (loss) $348.6 ($2,588.4) Segment margins 13.9% NM Revenues were flat year over year as the positive impact of changes in foreign currency and acquisitions was offset by lower revenues at Tyco Telecommunications. Revenues in the electronic components sector increased $160 million, or 7%, from foreign currency and $21 million, or 1%, from acquisitions, offset by a 2% decline due to weakened customer demand as decreases in telecommunications and industrial markets only partially offset by growth in product sales into the automotive industry. Telecommunications revenues declined $134 million, or 82%, to $29 million as no third party systems were built in 2003. Segment profit includes a net credit of $17.3 million in 2003 and charges of $2.957 billion in 2002. Favorable foreign currency fluctuations contributed $27 million in 2003. These improvements were partially offset by a decline in base profits and margins due primarily to reduced sales and mix changes in the electronic components sector. Fire and Security Services March 31, 2003 March 31, 2002 Segment revenues $2,778.9 $2,569.5 Segment (loss) profit ($702.6) $337.6 Segment margins NM 13.1% Revenues increased 8% due primarily to a $150 million, or 6%, positive impact of changes in foreign currency. Security revenues increased approximately $62 million, or 5%, as a result of foreign exchange. Fire revenues increased approximately $143 million, or 12%, including 7% from foreign exchange and 1% from acquisitions. The segment loss in 2003 includes $936.8 million in charges, compared to $28.1 million in 2002. Excluding these charges, operating income declined by $131.5 million year over year. In our security business, increased depreciation and amortization accounted for $48 million of the operating profit decline, reflecting the impact of rapid growth in the subscriber asset and dealer asset base in recent years, as well as the impact of acquisitions. In the European security business, the year over year decline in operating income was $ 42 million, primarily reflecting allowance for doubtful accounts and other expenses related to higher than expected attrition rates. The remainder of the decline in operating income for the segment was attributable to a weaker worldwide fire and contracting environment. Fire and Security has recently announced restructuring programs at its ADT U.S. and SimplexGrinnell operations, involving reductions of 1,400 and 1,000 employees, respectively. These restructuring programs will result in more streamlined and effective operations going forward. Healthcare March 31, 2003 March 31, 2002 Segment revenues $2,137.3 $1,968.3 Segment profit $520.7 $448.7 Segment margins 24.4% 22.8% Revenues increased 9%, including an $87 million, or 4%, increase from favorable changes in foreign currency partially offset by a $9 million decline from the net impact of acquisitions and divestitures. The increase in net revenues was largely attributed to increases in the Surgical sector resulting from the award of the Consorta contract and the introduction of the new TA Stapler product line; increases in the International division in Europe, Japan and Asia Pacific partially offset by a decline in Latin America; increases in the Pharmaceutical division due to higher volumes in Dosage Narcotics, APAP and microelectronic chemicals; increases in the Medical sector resulting from the April 2002 award of the Premier Wound Care Contract, successful launches of new safety needle and prefill syringe products, and increased demand in the Ultrasound market; increases in the Imaging division resulting from higher sales across the full product line; and increases in the Respiratory Division resulting mainly from increased volumes in Helios. These sales increases were partially offset by a decrease in Retail's base business. Segment profit includes $7.7 million in net charges in 2003 and $7.8 million in charges in 2002. Profits in 2003 were favorably impacted by $24.5 million from foreign currency exchange fluctuations. The remaining increase in profits and margins was largely attributed to the favorable sales performance noted above, favorable absorption as a result of increased production volumes, and continued focus on optimizing operating expenses. Engineered Products and Services March 31, 2003 March 31, 2002 Segment revenues $1,073.6 $1,101.2 Segment (loss) profit ($73.0) $152.7 Segment margins NM 13.9% Revenues declined 3% compared to the second quarter of 2002, comprised of a 9% decline primarily due to weaker non-residential construction markets and lower levels of capital and project spending by customers partially offset by a 6% benefit from favorable movements in foreign currency. Declines were most notable in Flow Control due to weaker valve and thermal control markets; Electrical and Metal Products, as lower levels of activity in non-residential construction markets was only partially offset by higher selling prices; and Earth Tech, primarily as a result of declines in government spending for environmental and other projects and declines in construction projects. Segment results include charges of $178.3 million in 2003 and $12.5 million in 2002. The decrease in profits and margins was due primarily to lower volume and competitive conditions in our major markets for valves and controls, thermal controls and electrical and metal products, as well as higher raw material costs. Plastics and Adhesives March 31, 2003 March 31, 2002 Segment revenues $488.5 $ 478.5 Segment profit $20.4 $47.9 Segment margins 4.2% 10.0% Revenues increased $10 million including a $9 million benefit from foreign currency. Higher selling prices in Plastics as a result of price increases related to the rising cost of raw materials, as well as increases in both Plastics and Adhesives resulting from higher volume of plastic sheeting and duct tape products, were offset by general economic weakness in the retail, food service, automotive, industrial and HVAC markets. Segment profit and margins declined year over year due to $26.7 million in charges recorded in 2003. Additionally, the impact of rising raw material costs and a less favorable sales mix were offset by lower selling, general and administrative expenses. Other Items Net interest expense was $278 million, up 23% from $226 million in the same period a year ago, primarily due to increased borrowing costs. Corporate expenses for the second quarter of 2003 include approximately $61 million of charges arising out of the Company's ongoing program of intensified internal audits and detailed controls and operating reviews. Additionally, Corporate expenses include incremental costs of $92 million to maintain and extend liability coverage under the Company's Directors and Officers (D&O) and Fiduciary insurance policies for the years 2001 to 2002. LIQUIDITY The Company had cash on hand of approximately $4.0 billion at March 31, 2003 compared to approximately $5.7 billion at December 31, 2002 and approximately $6.2 billion at September 30, 2002. During the second quarter, the Company issued convertible bonds with net proceeds of $4.4 billion, redeemed $3.9 billion in bank credit facilities and purchased $1.8 billion of its zero coupon convertible bonds due to the exercise of a put option by the holders of the security. The Company also repurchased $1.4 billion par value of its outstanding zero coupon bonds that have a put exercisable at the option of the holders in November 2003, at a purchase price of approximately $1.1 billion. Approximately $2.5 billion of this security remains outstanding. Other debt repurchases amounted to approximately $38 million. In January, the Company entered into a $1.5 billion 364-day unsecured revolving credit facility, none of which has been drawn down. Tyco's debt-to-capitalization ratio was 46.2% at March 31, 2003, compared with 48.3% at December 31, 2002 and 49.4% at September 30, 2002. The net debt- to-capitalization ratios were 37.8%, 36.9% and 36.8%, respectively, for the same periods. The Company has put in place a guarantee from Tyco International Group S.A. (Luxembourg) (TIGSA) to bond holders of the Tyco International Ltd. (Bermuda) zero coupon bonds due 2020 with a put option in November 2003. The Company has also put in place inter-company guarantees, primarily from its U.S. operating subsidiaries representing about two-thirds of consolidated tangible assets, in favor of TIGSA which should address the structural subordination concerns of Standard & Poor's Ratings Services (S&P). The inter- company guarantees become effective only if S&P's senior unsecured credit rating for TIGSA falls below BBB-. OUTLOOK Mr. Breen concluded: "Even in an uncertain global economy, our business units exceeded our expectations on cash flow generation and met our revenue expectations. These businesses traditionally have their strongest performance in the third and fourth quarters of the fiscal year. We believe that this will again be the case this year. The Fire and Security changes in amortization will result in a few cents higher expense for the second half of the year. Even with this we will strive continue to strive to achieve the low end of the range we set out for the second half of the year on March 13th. Additionally, we expect that our free cash flow will be at the top end of the range discussed on March 13th." ABOUT TYCO INTERNATIONAL Tyco International Ltd. is a diversified manufacturing and service company. Tyco is the world's largest manufacturer and servicer of electrical and electronic components; the world's largest designer, manufacturer, installer and servicer of undersea telecommunications systems; the world's largest manufacturer, installer and provider of fire protection systems and electronic security services and the world's largest manufacturer of specialty valves. Tyco also holds strong leadership positions in medical device products, and plastics and adhesives. Tyco operates in more than 100 countries and had fiscal 2002 revenues from continuing operations of approximately $36 billion. To see financial statements: http://bankrupt.com/misc/TYCO_INTERNATIONAL.htm CONTACTS: Media: Gary Holmes, 212-424-1314 Investor Relations: Kathy Manning, 603-334-3900 =========== B R A Z I L =========== ELETROPAULO METROPOLITANA: AES To Continue Talks With BNDES ----------------------------------------------------------- U.S. power firm AES Corp. gained more time to negotiate debts with Brazil's BNDES National Development Bank. On Monday, the Company's executives met with BNDES Chief Financial Officer Roberto da Costa to present its latest proposal to restructure US$1.2 billion of debt. However, the proposal didn't meet the bank's minimum requirements, the BNDES chief said, without revealing what those requirements are. A 90-day waiting period after AES's first default on debt payments was due Wednesday, freeing BNDES to take legal action to seize AES's local power distribution unit Eletropaulo Metropolitana SA in lieu of non-payment, Da Costa said. However, the BNDES exec said it would continue talks with the cash-strapped power firm and not try to exercise the right to seize ordinary shares in Eletropaulo after midnight on Wednesday. But, it would carry on with its plans to auction off preferred shares in it. "We would be facing a court fight of years and years. One, two or three days (of wait) cannot be more important than that," he said, adding that BNDES was expecting to hear a new proposal from AES after Friday's meeting of AES top brass. Voting shares would give BNDES control of Eletropaulo. CONTACT: ELETROPAULO METROPOLITANA Avenida Alfredo Egidio de Souza Aranha 100-B, 13 andar 04726-270 San Paulo Brazil Phone: +55-11-548-9461, +55 11 5696 3595 Fax: +55-11-546-1933 URL: http://www.eletropaulo.com.br Contacts: Luiz D. Travesso, Chairman and President Orestes Gonzalves Jr., VP Finance/Investor Relations IDEIASNET: To Make Acquisitions In Biotech, Telecoms Industries --------------------------------------------------------------- Rio de Janeiro-based tech venture capital fund IdeiasNet said it would use a BRL750,000-million capital increase carried out at the beginning of April to fund acquisitions in the biotechnology and telecoms industries. IdeiasNet plans to make acquisitions in the target industries in line with its more recent strategy to distance itself from dotcom ventures. "The market realized that the Internet is not a sector, but rather a technological tool. Even we had to adapt ourselves to this new reality," IdeiasNet investor relations director Rodin Spielmann said. IdeiasNet posted this week a 59.5% year-on-year reduction in net losses for 2002, at BRL3.56 million. The improvement was in part the result of administrative restructuring, causing operational costs to drop to BRL4.1 million, compared to BRL6.7 million in 2001. The Company's equity also increased in the quarter, due to a 10% stake increase in the 4Q02 in the Company's flagship subsidiary, software maker Softcorp, causing Ideiasnet total equity to reach BRL2.89 billion in the first quarter, up from BRL714 million in the 4Q02. TELEMAR: HP Brasil Rumored To Acquire Tnext ------------------------------------------- Widespread rumors suggest that the Brazilian subsidiary of multinational computer hardware manufacturer Hewlett-Packard may acquire Tnext, the Internet Data Center (IDC) unit of fixed line incumbent Telemar. An HP spokesperson refused to confirm the rumors but told Brazilian tech news agency IT Web that HP Brasil would have a big announcement next week. Citing a Telemar executive, Business News Americas relates that Telemar froze all investments in Tnext late last year and put its management under direct Telemar control. "[Tnext] was not profitable enough to remain independent," Telemar CEO Ronaldo Iabrudi said at the time. CONTACT: TNE - INVESTOR RELATIONS Roberto Terziani terziani@telemar.com.br 55 21 3131 1208 Carlos Lacerda carlosl@telemar.com.br 55 21 3131 1314 Fax: 55 21 3131 1155 GLOBAL CONSULTING GROUP Rick Huber, richard.huber@tfn.com Mariana Crespo, mariana.crespo@tfn.com Tel: 1 212 807 5026 Fax: 1 212 807 5025 Investor Relations Website: www.telemar.com.br/ri VARIG: Controllers Mulling Government's Planned Takeover -------------------------------------------------------- The controlling shareholders of Viacao Aerea Rio-Grandense SA (Varig) were expected to decide Wednesday on a plan wherein Brazil's government would take over the ailing airline under a proposed merger with rival TAM Linhas Aereas SA. Citing a merger proposal by the airline's adviser, Banco Fator SA, O Globo reports that the government would control 70% of the new airline because development bank BNDES and other state companies are Varig's biggest creditors. State-run Banco do Brasil SA and other creditors will have to forgive debt and invest as much as US$550 million in the new company, giving them the right to control, the paper adds. The current controllers of Varig and Tam would end up with 30% of the airline. Varig, which lost BRL2 billion in the first nine months of 2002, sees the merger as the only way to prevent a financial collapse. CONTACT: VARIG (Viacao Aerea Rio-Grandense, S.A.) Rua 18 de Novembro No. 800, Sao Joao 90240-040 Porto Alegre, Rio Grande do Sul, Brazil Phone: (51) 358-7039/7040 (51) 358-7010/7042 Fax: +55-51-358-7001 Home Page: www.varig.com.br/english/ Contacts: Dorival Ramos Schultz, EVP Finance and CFO E-mail: dorival.schultz@varig.com.br Investor Relations: Av. Almirante Silvio de Noronha, n 365-Bloco "B" - s/458 / Centro Rio de Janeiro, Brazil TAM Daniel Mandelli Martin, President Buenos Aires Tel. (54) (11) 4816-0001 URL: www.tam.com.br ========= C H I L E ========= AES CORP.: May Use Dividends To Pay Interest On Debt With Unit -------------------------------------------------------------- US-based power company AES Corp will pay interest on a US$300- million debt with its Chilean generation subsidiary AES Gener by using its share of 2002 profits earned by the unit, Business News Americas relates, citing representatives of AES Corp's investment group Inversiones Cachagua, who spoke at AES Gener's annual shareholders meeting. AES Corp. lacks the cash to settle the current debt, hence it will pass on its share of US$29 million dividends that AES Gener plans to distribute amongst shareholders after posting consolidated net profits of CLP32.4 billion (currently US$46.1 million) in 2002. AES Corp may also have to sell part of its 98.65% stake in AES Gener to pay the remainder of the debt due in February 2004, according to AES Gener CEO Felipe Ceron. ENERSIS: ENDESA Reports First Quarter 2003 Consolidated Results --------------------------------------------------------------- Overall results represent a 12.8% decrease over the same period of 2002 when earnings were positively affected by the sale of 87.5% of Viesgo; if compared in homogeneous terms, that is, disregarding the net effect of capital gains and extraordinary provisions, first quarter 2003 net income increased by 43.1% over the same period of 2002. -- Cash flow from operations amounted to Euro 991 million during the first quarter 2003, a 35.8% increase versus the same period of 2002. -- Ordinary income was Euro 590 million in the first quarter of 2003, compared to a Euro 161 million loss over the same period of 2002. This increase shows the important improvement in the quality of the results. -- Ordinary income was Euro 590 million in the first quarter of 2003, compared to a Euro 161 million loss over the first quarter of 2002. -- Operating income for the domestic electricity business amounted to Euro 460 million, an 8.0% increase against the same period of 2002. -- This increase reveals the competitiveness of ENDESA's generation mix that, despite its strong thermal generation component, shows a remarkable stability even in periods of strong hydro generation, as the first quarter 2003. -- Operating income for the electricity business in Europe amounted to Euro 107 million, a 27.4% increase over the first quarter 2002. -- Operating income in the Latin America electricity business amounted to Euro 291 million in the first quarter 2003. This represents a 13.1% decrease over the first quarter 2002, a favourable evolution if compared to the 34.6% average devaluation of the local currencies in the five countries where ENDESA operates. -- In local currency terms, operating income from the Latin American companies increased by 38.5% while in US dollar terms grew by 6.4%, showing its strong profitability potential. -- Latin America electricity business has shown a Euro 19 million loss, which represents a remarkable improvement compared to the Euro 183 million loss of the first quarter of 2002. -- ENDESA's operating income amounted to Euro 864 million, increasing 2% against the same period in 2002. -- ENDESA reduced its debt by Euro 2,881 million over the debt reported in December 2002. As a consequence, debt fell to Euro 19,866 million as of March 31st 2003. -- Compared to the debt outstanding on March 31st 2002, ENDESA's debt decreased by Euro 5,028 million until March 31st 2003. -- Average cost of debt for the quarter was 5.2%, in line with the cost in the first quarter of 2002. -- Average cost of debt for ENDESA, excluding ENERSIS, was 4.3%. -- The significant debt reduction and the stable average cost have allowed a 5.1% decrease in net financial expenses. -- In the first quarter 2003, ENDESA significantly improved its leverage ratio: debt to equity and minorities decreased 54 percentage points, from 203% at year-end 2002 to 149% on March 31st 2003. -- Following ENDESA's 2002-2006 Strategic Plan, total investments in the first quarter of 2003, decreased by 47% vis-a-vis the same period of 2002, amounting to Euro 477 million. -- In the first quarter of 2003, capital expenditures in the domestic distribution business amounted to Euro 101 million, a 9.8% increase over the same period in 2002. (NYSE:ELE) ENDESA's net income for the first quarter of 2003 was Euro 669 million and earnings per share were Euro 0.63. As a consequence of the capital gains from the sale of 87.5% of Viesgo in the first quarter 2002 and the extraordinary provisions allocated in the same period, the evolution of both, net income and earnings per share showed a 12.8% decrease. However, should the capital gains and extraordinary provisions effects be discounted, net income and earnings per share in the first quarter 2003 increased by 43.1% over the same period in 2002. First quarter 2003 cash flow amounted to Euro 991 million, a 35.8% increase over the same period in 2002, hence, showing the same trend as the adjusted net income mentioned above. Ordinary income was Euro 590 million in the first quarter of 2003, with an increase of Euro 751 million over the same period in 2002, when showed a Euro 161 million loss. This change shows a positive operative evolution of the Company together with the important improvement in the quality of the results. Operating income amounted to Euro 864 million, increasing 2% over the same period in 2002. This growth was mainly based on the 8% increase in the operating income of the domestic electricity business, despite it did not include the result from the transmission network sold to Red Electrica de Espana, S.A (REE). Regarding the Latin America electricity business, operating income amounted to Euro 291 million in the first quarter 2003, Euro 44 million lower than first quarter 2002. This amount represents a 13.1% decrease and is mainly due to the local currencies devaluation between the first quarter 2002 and the same period in 2003. On the other hand, in local currency terms operating income increased by 38.5% while in US dollar terms grew by 6.4%. As for electricity business from European countries other than Spain, operating income amounted to Euro 107 million, a 27.4% increase over the first three months of 2002. Financial results improved by Euro 682 million over the same period of 2002. This positive evolution is mainly due to lower foreign exchange differences that amounted to a Euro 64 million net gain, against a Euro 573 million loss in the first quarter 2002. Between March 31st 2002 and March 31st 2003, ENDESA debt decreased by Euro 5,028 million. This substantial decrease, together with a sustained average cost of debt over the first quarter 2002, enabled a 5.1% decrease in net financial expenses. In the first quarter 2003, ENDESA continued the implementation of the asset disposal plan included in the Strategic Plan 2002-2006 with the completion of the sales of the mainland transmission network and certain real estate assets both agreed in 2002, as well as the sale of the stake in REPSOL. These transactions delivered Euro 658 million in gross capital gains. Moreover, in the first months of 2003 ENERSIS Group agreed the sale in Chile of Rio Maipo distribution company, Canutillar hydro power plant and the transmission assets of the Norte Grande interconnected system for a total amount of US dollar 454 million not accounted in the first quarter 2003 financial statements. As of March 31st 2003, ENDESA's net debt amounted to Euro 19,866 million, representing a Euro 2,881 million reduction over the net debt outstanding on December 31st, 2002. A significant part of this reduction is due to the Euro 1,500 million Preferred Securities issue by ENDESA Capital Finance LLC, increasing the minority interests in the balance sheet and decreasing debt for the same amount, hence enabling a significant improvement of ENDESA's financial structure. As a consequence of this, ENDESA's leverage on March 31st 2003 was 149% against 203% in December 31st 2002. Additionally, in the first quarter 2003 ENDESA made several long- term financial transactions that besides extending the average term of debt, increased ENDESA's liquidity in Spain. On March 31st 2003, liquidity amounted to Euro 4,926 million, more than covering the debt maturing in Spain in the next two years. Moreover, ENERSIS' debt refinancing and the already agreed divestitures will bring to this company the coverage of debt maturing on December 2005. On the other hand, in the first quarter 2003 extraordinary provisions were allocated to cover different contingencies for an amount of Euro 118 million. Finally, its important to point out the significant improvement in AUNA's and Smartcom's results, meaning for ENDESA a Euro 43 million increase in the equity income contribution from these stockholdings. 1. Change in consolidated perimeter. As a consequence of the agreement for the sale of ENERSIS' stake in Rio Maipo, this company is no longer globally consolidated in ENDESA's accounts in the first quarter 2003. Additionally, as a consequence of the sale of ENDESA's stake in REPSOL, its consolidation by equity method has also been discontinued in the first quarter 2003. Finally, since January first, 2003 ENDESA Gas is no longer included in ENDESA Diversificacion and started reporting to ENDESA Red. For this reason, the results of the gas distribution and supply activities have been included in the domestic electricity business, instead of under "other business" as was reported in the first quarter 2002. 2. Analysis of Results. The table below shows the main magnitudes of ENDESA's consolidated profit and loss account for the first quarter of 2003 and their comparison against the same period in 2002. Main magnitudes of ENDESA's profit and loss account (Euro million) ---------------------------------------------------------------- 1Q-03 1Q-02 %Chge. ---------------------------------------------------------------- Revenues 3,927 4,374 -10.2 ---------------------------------------------------------------- EBITDA 1,258 1,294 -2.8 ---------------------------------------------------------------- Operating Income 864 847 2,0 ---------------------------------------------------------------- Ordinary Income 590 (161) N/A ---------------------------------------------------------------- Net Income 669 767 -12.8 ---------------------------------------------------------------- Cash flow 991 730 35.8 ---------------------------------------------------------------- 1.1 Operating income ENDESA's revenues in the first quarter 2003 amounted to Euro 3,927 million, a 10.2% decrease over the same period of previous year. EBITDA was Euro 1,258 million, showing a 2.8% decrease vis-a-vis the first quarter of 2002. Operating income for the first three months of 2003 was Euro 864 million, an increase of 2.0% against the same period last year. The table below shows a breakdown of revenues, EBITDA, operating income and cash flow among the different markets and lines of business in which ENDESA operates. Electricity Domestic Europe Latin America Other ---------------------------------------------------------------- Euro % on Euro % on Euro % on Euro % on Million total Million total Million total Million total ----------------------------------------------------------------- Revenues 2,470 62.9 582 14.8 844 21.5 31 0.8 ----------------------------------------------------------------- EBITDA 716 56.9 135 10.8 394 31.3 13 1.0 ----------------------------------------------------------------- Operating income 460 53.2 107 12.4 291 33.7 6 0.7 ----------------------------------------------------------------- Cash flow 426 43.0 122 12.3 130 43.4 13 1.3 ----------------------------------------------------------------- 1.2 Domestic electricity business Operating income for the domestic electricity business was Euro 460 million, an increase of Euro 34 million in absolute and 8.0% in relative terms against the same period of 2002. Its important to highlight that this evolution has been affected by the sale of the mainland transmission network. In homogeneous terms, operating income for the first quarter of 2003 increased by 11.3% over the same period in 2003. Among other things, this increase in the operating income reflects the high competitiveness of ENDESA's generation mix and the remarkable stability in the operating income even in periods of strong hydro generation as in the first quarter 2003. This higher operating income has been mainly due to the 1.65% average increase in the 2003 regulated electricity tariff, the 3.2% increase of the liberalized customer electricity prices and the Euro 50 million lower fuel costs as a consequence of better hydro conditions in the first quarter of 2003. Paragraphs below show a detailed analysis of the items comprised in the operating income. 1.2.1 Revenues Revenues from the domestic electricity business amounted to Euro 2,470 million in the first quarter of 2003, a decrease of 11.1% against the same period of 2002. The table below shows a breakdown of revenues. Euro million -------------------------------------------------------------- March March Change %Chge 31st 31st '03 '02 -------------------------------------------------------------- Revenues 2,285 2,884 (599)-20.8 -------------------------------------------------------------- CTC by technology 107 - 107 N/A -------------------------------------------------------------- Tariff deficit (179) 179 N/A -------------------------------------------------------------- CTC coal 19 11 8 72,7 -------------------------------------------------------------- Services 59 61 (2) -3,3 -------------------------------------------------------------- TOTAL 2,470 2,777 (307)-11.1 -------------------------------------------------------------- Sales Sales in the first quarter of 2003 were Euro 2,285 million, broken down as follows: Euro million ---------------------------------------------------------------- March March Change %Chge. 31st 31st '03 '02 ---------------------------------------------------------------- Generation, mainland 633 1,077 (444)-41.2 ---------------------------------------------------------------- Distribution and transmission, mainland 931 1.199 (268)-22.3 ---------------------------------------------------------------- Supply 324 288 36 12.5 ---------------------------------------------------------------- Trading 33 27 3 11.1 ---------------------------------------------------------------- Extra peninsular systems 228 209 19 9.1 ---------------------------------------------------------------- Extra peninsular compensations 54 52 2 3.8 ---------------------------------------------------------------- Gas 48 12 36 N/A ---------------------------------------------------------------- Other(a) 34 20 14 70.0 ---------------------------------------------------------------- TOTAL 2,282 2,884 (602)-20.9 ---------------------------------------------------------------- (a) As a consequence of including the gas distribution business into ENDESA Red, gas revenues in the first quarter 2003 includes both regulated and non-regulated revenues, while in 2002 only included non-regulated revenues. Generation In the first quarter 2003, demand for electricity in the mainland grew by 4.8% against the same period of 2002. However, the output from generators under the ordinary regime was 5.8% higher than in the first quarter 2002, due to the 85% decrease in the imports of electricity and a 14.9% higher output from generators under the special regime. ENDESA's output in the mainland sold in the wholesale market was 19,304 GWh in the first quarter of 2003, a 0.6% decrease against the same period of 2002. This represents a 40.5% market share in the ordinary regime. Despite approximately the same generation output than in the first quarter 2002, sales in the mainland were 41.2% lower as a result of a 42.5% lower pool price that averaged to 3.02 Euro cents per kWh. This decrease in the pool price was due to lower fuel costs of the system driven by better hydro conditions. Nevertheless, the reduction in generation revenues due to the lower pool prices has been compensated by the lower fuel costs as well as by the natural hedging of the generation price, that is, CTC's and the supply business. The table below shows the structure of the generation in the mainland for both ENDESA and the whole of the industry for the first quarters of 2002 and 2003: Structure of electricity generation in the mainland for ENDESA and the total industry (%) ---------------------------------------------------------------- Endesa Total industry ---------------------------------------------------------------- 1Q 1Q 1Q 1Q 2003 2002 2003 2002 ---------------------------------------------------------------- Nuclear 34.4 36.4 31.6 32.1 ---------------------------------------------------------------- Coal 42.5 51.5 32.7 45.9 ---------------------------------------------------------------- Hydro 17.7 6.8 29.8 10.1 ---------------------------------------------------------------- Fuel-gas 1.2 5.3 1.7 11.9 ---------------------------------------------------------------- CCGT 4.2 - 4.2 - ---------------------------------------------------------------- Total 100.0 100.0 100.0 100.0 ---------------------------------------------------------------- Distribution ENDESA sold 19,898 GWh in the mainland in the first quarter of 2003. This figure represents a share of 41.4% of distribution in the mainland. Revenues from distribution in the mainland dropped by Euro 268 million. This decrease corresponded to the lower cost of energy purchases, mainly as a result from the lower pool prices. Regulated margin on distribution remains at similar levels as in the first quarter 2002. Should this effect been discounted, distribution sales would have increased by Euro 13 million against first quarter of 2002, a 4.4% rise. Supply In the first three months of 2003, ENDESA sold 5,912 GWh to eligible customers, a 9.0% increase against the same period of 2002. This higher electricity sold together with a 3.2% increase in its average price, resulted in a 12.5% revenues increase in supply, amounting to Euro 324 million. Extra Peninsular Systems In the first quarter 2003 ENDESA's output in the extra peninsular systems was 2,876 GWh, 7.6% higher than in the first quarter of 2002. Sales in these markets amounted to Euro 228 million, a 9.1% increase against the same period of 2002 driven, among other reasons, by higher demand. In addition to this, revenues include Euro 54 million from compensations, a Euro 2 million increase against the first quarter of 2002. CTC and tariff deficit As a consequence of better hydro conditions in the first quarter 2003 over the same period of 2002, total revenues of the industry covered the costs of the system. The balance has been applied to CTC's, corresponding to ENDESA Euro 107 million. On the other hand, in the first quarter 2002 total industry revenues did not cover all recognized costs of the system. For this reason, a shortfall in the regulated business revenues - tariff deficit- emerged. ENDESA, due to a lack of security in its recovery, reported this shortfall as lower revenues for an amount of Euro 179 million. 1.2.2 Operating costs The table below shows operating costs for the domestic electricity business in the first quarter of 2003 and its comparison with the same period of 2002. Euro million 1Q-03 1Q-02 Change% chg. ----------------------------------------------------------------- Purchases 1,418 1,785 (367)-20.6 ----------------------------------------------------------------- Purchases of energy 926 1.315 (389)-29.6 ----------------------------------------------------------------- Fuel 358 390 (32) -8.2 ----------------------------------------------------------------- Transmission and other external expenses 134 80 54 67.5 ----------------------------------------------------------------- Depreciation 256 264 (8) -3.0 ----------------------------------------------------------------- Provisions 7 15 (8)-53.3 ----------------------------------------------------------------- Personnel 208 211 (3) -1.4 ----------------------------------------------------------------- Other Operating Costs 169 110 59 53.6 ----------------------------------------------------------------- TOTAL 2,058 2,385 (327)-13.7 ----------------------------------------------------------------- Purchases In the first quarter 2003, purchases decreased by Euro 367 million or 20.6% against first quarter 2002 mainly due to the following reasons: -- Lower energy purchases by ENDESA's distribution and supply subsidiaries in the amount of Euro 389 million, representing a 29.6% decrease over the same period of 2002. This decrease was due to the reduction in the average pool price mentioned above. -- Fuel costs decreased by Euro 50 million as a consequence of higher hydro generation in the first three months of 2003 when compared to the same period of 2002. -- Gas purchases for the regulated gas business amounting to Euro 18 million that in the first quarter 2002 was reported in "Other businesses". This is a consequence of the inclusion of ENDESA Gas financial information in ENDESA Red, while in 2002 it was reported in ENDESA Diversificacion. -- Electricity transmission costs increased by Euro 54 million due to the sale of the transmission network. Personnel expenses On March 31st 2003 workforce of ENDESA's domestic electricity business amounted to 13,587 employees. Should the 109 employees of ENDESA Gas been disregarded, since in 2002 this company was reported under "Other businesses", ENDESA's workforce would have decreased by 70 employees over December 31st 2002. Personnel expenses in the first quarter 2003 amounted to Euro 208 million, a 1.4% decrease versus the same period of 2002. Other operating expenses Other operating expenses amounted to Euro 169 million in the first quarter 2003, increasing by Euro 59 million when compared to the same period of 2002. This increase was due to the following reasons: -- Euro 31 million corresponded to certain expenses materialized in advance. This does not imply any change in total annual expenses; therefore, this amount will be diluted in the following quarters to be compared with the same period of 2002. -- Expenses related to new activities amounted to Euro 9 million. These activities are mainly related to domestic electricity business, that is, CCGT's, gas distribution and liberalized retail customer service. -- Higher offices lease costs of Euro 7 million. This was due to the transfer to the new headquarters in Campo de las Naciones and to the sale of real estate assets. -- Tax cost increased mainly due to the public thoroughfare levy, amounting to Euro 8 million. 1.2. European electricity business Operating income for the electricity business in European countries other than Spain amounted to Euro 107 million, a 27.4% increase over the first quarter 2002. This result entirely corresponds to the activity carried out by ENDESA Italia. Trading business in European markets is included in both revenues and energy purchases, delivering a balanced result. The table below shows the operating result variation of ENDESA Italia in the first quarters of 2003 and 2002. Euro million ----------------------------------------------------------------- 1Q-03 1Q-02 Change% chge. ----------------------------------------------------------------- Revenues 367 312 55 17.6 ----------------------------------------------------------------- Other revenues 4 2 2 100 ----------------------------------------------------------------- Energy purchases (22) - (22) N/A ----------------------------------------------------------------- Raw materials (179)(164) (15) 9.1 ----------------------------------------------------------------- Energy transmission (1) - (1) N/A ----------------------------------------------------------------- Personnel expenses (16) (18) 2 -11.1 ----------------------------------------------------------------- Depreciation (27) (29) 2 -6.9 ----------------------------------------------------------------- Other expenses (16) (17) 1 -5.9 ----------------------------------------------------------------- Operating income 110 86 24 27.9% ----------------------------------------------------------------- Revenues increased by 17.6% over the first quarter 2002 as a result of a 5.7% increase in energy sales and higher sales price in all its components: a 12% increase in the fuel costs remuneration in the regulated market and a 8.4% increase in the sales price in the liberalized market. Total electricity sales in the first quarter 2003 was 4,981 GWh, of which 365 Gwh corresponds to electricity purchased from third parties representing a Euro 22 million cost. ENDESA Italia total output amounted to 4,626 GWh in the first quarter 2003 compared to 4,718 Gwh in the same period of 2002. This 92 Gwh output decrease breakdowns in a 236 GWh increase in hydro generation and a 329 GWh decrease in thermal generation, enabling Euro 15 million in lower fuel costs. Its important to highlight that in the first quarter 2003 fixed personnel costs and other operating costs decreased as a result of lower workforce that, on March 31st 2003, totaled 1,125 employees, while on March 31st 2002 was 1,286 employees. 1.3. Latin American electricity business Electricity demand strongly recovered in all the countries where ENDESA operates in the first quarter 2003 over the same period in 2002. Electricity distributed specially grew in Brazil, Chile and Peru. This growth fits with the first symptoms of recovery from the economic situation suffered by the region during 2002. This reveals that the Latin America electricity business of ENDESA will experience a remarkable improvement once the consolidation of these recovery symptoms occurs. This also shows its endurance to tough economic scenarios, compared to other industries of the economy. The table below shows the physical data of generation and distribution businesses of ENDESA's affiliates in the first quarter 2003 over the same period in 2002. Generation (GWh) Distribution (GWh) ----------------------------------------------------------------- 1Q 2003 % 1Q 2003 % Chge./1Q Chge./1Q 2002 2002 ----------------------------------------------------------------- Chile 4,310 4,2 2,499 6.0 ----------------------------------------------------------------- Colombia 2,518 -5.9 2,239 2.6 ----------------------------------------------------------------- Argentina 2,432 -13.3 3,168 2.6 ----------------------------------------------------------------- Brazil 402 1.8 3,350 11.8 ----------------------------------------------------------------- Peru 1,298 13.7 999 5.2 ----------------------------------------------------------------- TOTAL 10,960 -1.7 12,255 5.9 ----------------------------------------------------------------- Financial results were significantly affected by the consequences of the difficult economic scenario that Latin America went through in 2002, felt with mixed intensity among the different countries of the area. Particularly important were the local currencies devaluations against the Euro between the first quarter 2002 and the same period of 2003, ranging between 18.9% in the Peruvian Sol and 47.3% in the Argentinean Peso. However, the economic recovery symptoms mentioned above, have begun to be reflected in the operative performance of these companies measured both in local currencies and in US dollar. Operating income for the Latin American electricity business in amounted to Euro 291 million, a 13.1% decrease against first quarter 2002. However, in local currency terms, operating income from the Latin American companies that are fully consolidated increased by 38.5% while in US dollar grew by 6.4%, showing its profitability potential. The table below shows the performance of the EBITDA and operating income in Latin America broken down by activity: Euro million --------------------------------------------------------------- EBITDA Operating income --------------------------------------------------------------- 2003 2002 %chge. 2003 2002 %chge. --------------------------------------------------------------- Generation 203 240 -15.4 149 170 -12.4 --------------------------------------------------------------- Distribution & Transmission 200 243 -17.7 151 173 -12.7 --------------------------------------------------------------- Others (a) (9) (4) N/A (9) (8) N/A --------------------------------------------------------------- Total 394 479 -17.7 291 335 -13.1 --------------------------------------------------------------- (a) 2002 includes Rio Maipo. Since this company was sold in 2003, it was not included in the 2003 operating income. The table below shows EBITDA and operating income of generation and distribution in the first quarter 2003 and the same period of 2002, broken down by country where ENDESA has fully consolidated affiliates. EBITDA Operating income ----------------------------------------------------------------- 1Q- 1Q- %Chge. 1Q- 1Q- %Chg. 03 02 03 02 ----------------------------------------------------------------- Generation ----------------------------------------------------------------- Chile 81 98 -17.3 59 73 -19.2 ----------------------------------------------------------------- Colombia 44 54 -18.5 34 37 -8.1 ----------------------------------------------------------------- Brazil 11 17 -35.3 9 14 -35.7 ----------------------------------------------------------------- Peru 36 43 -16.3 23 32 -28.1 ----------------------------------------------------------------- Argentina 31 28 10.7 24 14 71.4 ----------------------------------------------------------------- TOTAL Generation 203 240 -15.4 149 170 -12.4 ----------------------------------------------------------------- Distribution & Transmission ----------------------------------------------------------------- Chile 34 44 -22.7 30 39 -23.1 ----------------------------------------------------------------- Colombia 30 38 -21.1 15 16 -6.3 ----------------------------------------------------------------- Brazil 94 97 -3.1 79 76 3.9 ----------------------------------------------------------------- Peru 18 22 -18.2 11 14 -21.4 ----------------------------------------------------------------- Argentina 24 42 -42.9 16 28 -42.9 ----------------------------------------------------------------- TOTAL Distribution & Transmission 200 243 -17.7 151 173 -12.7 ----------------------------------------------------------------- Its important to point out that in all countries the decrease in operating income was lower than the local currency devaluation, meaning that operating income increased in local currency terms in all countries were ENDESA operates. Likewise, income in Colombia both in generation and distribution decreased by less than 10% over the first quarter 2002, while the devaluation in the Colombian peso against Euro was 36.7%. This was made possible by the high correlation between the electricity prices and US dollar. In the rest of countries, income decreased, in general, less than local currency devaluation. However, the pass through of 2002 currency devaluation to electricity prices is more gradual than in Colombia, although it is foreseeable that an important part of the 2002 devaluations will be recovered in the future. 3. Financial results Financial results showed a net loss of Euro 187 million in the first quarter 2003, this is Euro 682 million lower than the same period of 2002, broken down as follows: Euro million -------------------------------------------------------------- 1Q 1Q Change % 2003 2002 Chge. -------------------------------------------------------------- Financial expenses (355)(376) 21 5.6 -------------------------------------------------------------- Financial income 58 63 (5) -7.9 -------------------------------------------------------------- FX Differences 64 (573) 637 N/A -------------------------------------------------------------- Monetary correction 46 18 28 155.6 -------------------------------------------------------------- Change in provisions - (1) 1 N/A -------------------------------------------------------------- Total financial income (187)(869) 682 78.5 -------------------------------------------------------------- 3.1. Net financial expenses In the first quarter 2003 ENDESA reduced its debt by Euro 2,881 million over the debt reported in December 2002. As a consequence, debt fell to Euro 19,866 million as of March 31st 2003. Debt reduction was the result of the following: -- Result from operations in the quarter resulted in a debt reduction of Euro 997 million. Items 7 and 8 below show the sources and uses of funds that resulted in such reduction. -- Preferred notes issued by ENDESA Capital Finance LLC for an amount of Euro 1,500 million, increasing the minority interests and reducing debt by such amount. -- Variation in the exchange rates against the Euro of the currencies in which the debt of the consolidated affiliates is denominated have resulted in a Euro 351 million decrease of the total consolidated debt. -- The consolidation perimeter changes resulted in a debt reduction of Euro 33 million. Its important to highlight the significant improvement of leverage. Results from operations and the preferred notes issue facilitated debt reduction and an increase in minority interests. Hence, debt over equity ratio decreased 54 percentage points, from 203% at year-end 2002 to 149% on March 31st 2003. On the other hand, average cost of debt for the quarter was 5.2%, approximately the same as in the same period of 2002, while average cost of debt for ENDESA, excluding ENERSIS, was 4.3%. Lower debt and same average cost enabled net financial expenses reduction of Euro 16 million, a 5.1% decrease against the first quarter 2002. The following table shows a breakdown of debt and its average cost by line of business in the first quarter of 2003: March Average 31st- cost 03 1Q Debt 2003 % ---------------------------------------------------------------- Domestic electricity business 6,788 4.41 ---------------------------------------------------------------- Latin America electricity business 9,312 6.63 ---------------------------------------------------------------- European electricity business 1,654 3.31 ---------------------------------------------------------------- Other businesses 2,112 4.25 ---------------------------------------------------------------- TOTAL 19,866 5.20 ---------------------------------------------------------------- 3.2. Foreign Exchange Differences Net foreign exchange differences for the first quarter 2003 resulted in Euro 64 million net gain, mainly corresponding to a 12.7% revaluation in the Argentinean Peso against US dollar in such period. However, ENDESA has not reflected in net income the net positive differences generated by its subsidiaries in Argentina since, following conservative accounting procedures, an additional provision was allocated. 4. Equity income On March 31st 2003, losses attributable to ENDESA under the equity method were Euro 13 million, a Euro 36 million improvement over the first quarter 2002. The main component of the equity losses corresponds to the shareholdings in telecommunications affiliates. Telecommunications holding company AUNA represented to ENDESA a Euro 22 million net loss in the first quarter of 2003 compared to Euro 56 million net loss in the same period of 2002. This positive evolution was enabled by a favorable operating performance, delivering a positive EBITDA of Euro 180 million, a 57% increase over the first quarter 2002. On March 31st 2003, AUNA had 6,850,000 mobile telephony customers (390,000 more than on December 31st 2002) and more than 559,000 cable customers, almost double than one year ago. The Chilean mobile telephone operator Smartcom, contributed with a Euro 10 million net loss in the first quarter 2003, compared to Euro 19 million net loss in the same period of 2002. On March 31st 2003 Smartcom had over 1 million customers, representing more than 16% market share that enabled a Euro 4.5 million positive EBITDA. 5. Extraordinary results Extraordinary results for ENDESA in the first quarter 2003 were Euro 528 million. Its main components were the following: -- Euro 514 million capital gain from the sale of the Spanish mainland transmission network. -- Euro 152 million capital gain from the sale of certain real estate assets in Spain. -- Euro 8 million capital losses from the sale of the stake in REPSOL. -- Euro 43 million provisions to cover risks related to the domestic electricity business. -- Euro 75 million provisions to cover risks related to the Latin American electricity business. Of this amount, Euro 51 millions was allocated to cover the risk arising from investments in Argentina, in addition to the Euro 145 million provisioned in 2002. This additional provision was a consequence of the revaluation in the Argentinean peso that enabled positive results in ENDESA's affiliates in this country. ENDESA, following conservative accounting criteria, has provisioned these positive results to maintain zero book value in the Argentinean investments as well as its share in the direct and indirect intercompany loans in Argentina. 6. Information by Line of Business Table below shows the main income statement and balance sheet parameters as of March 31, 2003 by line of business: Euro Million ---------------------------------------------------------------- Revenues Operating Net Fixed income income asset ---------------------------------------------------------------- Generation 916 199 116 8,245 ---------------------------------------------------------------- Distribution 1,293 159 497 6,368 ---------------------------------------------------------------- Supply 356 4 1 8 ---------------------------------------------------------------- Latino America 844 291 (19)9,042 ---------------------------------------------------------------- Europe 582 107 25 2,375 ---------------------------------------------------------------- Other businesses 31 6 (46) 375 ---------------------------------------------------------------- Services 46 4 3 58 ---------------------------------------------------------------- Corporate Structure 170 94 92 17 ---------------------------------------------------------------- 7. Cash Flow, Investments and Financing Cash flow from operations amounted to Euro 991 million during the first quarter 2003, a 35.8% increase over the same period of 2002. This cash flow more than covered capital expenditures which amounted to Euro 477 million, payment of the interim dividend to ENDESA's shareholder on January 2nd 2003 for an amount of Euro 280 million and to minorities in the amount of Euro 29 million as well as payment of previously provisioned commitments, such as early retirements, in the amount of Euro 132 million. In the first three months of 2003 the asset sales amounted to Euro 1,846 million, breakdown as follows: Euro million ------------------------------------------------------------- Transmission network 957 ------------------------------------------------------------- REPSOL 504 ------------------------------------------------------------- Real estate 385 ------------------------------------------------------------- TOTAL 1,848 ------------------------------------------------------------- Out of this amount, Euro 535 million were cash in 2002. Total investments in the first quarter of 2003 amounted to Euro 477 million, a 47.2% decrease over the same period of 2002 following ENDESA's 2002-2006 Strategic Plan. Euro million ---------------------------------------------------------------- 1Q- 1Q- %Chge. 03 02 ---------------------------------------------------------------- Capital Expenditures 386 389 -0.8 ---------------------------------------------------------------- Intangibles 4 6 -33.3 ---------------------------------------------------------------- Financial 87 381 -77.2 ---------------------------------------------------------------- Acquisition of shares in consolidated companies - 127 N/A ---------------------------------------------------------------- Total investments 477 903 -47.2 ---------------------------------------------------------------- Its important to highlight that first quarter 2003 capital expenditure were approximately the same as depreciation and amortization that amounted to Euro 394 million, showing the conservative investment profile of the company. The breakdown of capital expenditures by line of business is as follows: Euro million Electricity business --------------------------------------------------------------- Spain Latin Europe Other Total America businesses --------------------------------------------------------------- Generation 82 88 53 - 223 --------------------------------------------------------------- Distribution 101 35 - - 136 --------------------------------------------------------------- Others 16 4 - 7 27 --------------------------------------------------------------- Total 199 127 53 7 386 --------------------------------------------------------------- Following the 2002-2006 Strategic Plan, capital expenditures in the domestic distribution business grew by 9.8% in the first quarter 2003 over the same period in 2002. 8. Financing activity Financing activity wise, in the first quarter of 2003 ENDESA made long-term financing transactions for an amount of Euro 2,250 million and an average life of 6.24 years. Moreover, ENDESA significantly strengthened its financial structure through the preferred notes issue of ENDESA Capital Finance LLC for an amount of Euro 1,500 million, resulting in an increase of the minority interests and a decrease of the net debt for the same amount. Liquidity of ENDESA in Spain on March 31st 2003 amounted to Euro 4,926 million, that is, more than the ENDESA debt maturing in Spain in the following two years. Latin America wise, ENERSIS and ENDESA Chile agreed with SCH, BBVA Dresdner Bank and Citibank the terms of the refinancing of their total bank debt for an amount of US dollar 2,330 million. The new loan, with an average life of 3.75 years, is currently under syndication process. Moreover, in the second quarter 2003, ENERSIS and ENDESA Chile will receive the proceeds of the previously agreed sales of Rio Maipo, Canutillar hydro power plant and the transmission assets of the interconnected system of Rio Grande, amounting to US dollar 454 million. CONTACT: Jacinto Pariente North America Investor Relations Office Telephone No. 212 750 7200 =============== C O L O M B I A =============== AVIANCA: Judge Extends Authorization For Interim DIP Loan --------------------------------------------------------- Colombian airline Aerovias Nacionales de Colombia SA (Avianca) obtained approval from U.S. Bankruptcy Judge Allan L. Gropper to extend interim debtor-in-possession loan authorization through May 8, when a final hearing on the proposed $18.5 million DIP loan will be held. According to Dow Jones, the airline's majority shareholders - Colombian conglomerate Valores Bavaria and the National Federation of Coffee Growers - agreed to provide the DIP loan to fund Avianca's working capital and other general needs. The court initially granted Avianca interim approval of the DIP loan on March 27 and scheduled a final hearing for April 11. At the April 11 hearing, Gropper extended the interim approval through last Thursday, when a final hearing was to have been held. Interim approval was again continued at the hearing last Thursday. Objections to final approval of the DIP loan are now due May 5, three days before the final hearing. CONTACT: AVIANCA P.O. Box 151310 Av. el Dorado no. 93-30 Bogota, Colombia Phone: (1) 413 9511 (1) 295 8977 AVIANCA: Unsecured Creditors Committee Defends Ch. 11 Filing ------------------------------------------------------------ The official committee of Avianca's unsecured creditors defended the Company's move to file its Chapter 11 bankruptcy case in the U.S. after two of the Colombian airline's aircraft lessors demanded that the case be dismissed. According to court documents obtained by Dow Jones Newswires, aircraft lessors Pegasus Aviation Inc. and Ansett Worldwide Aviation Ltd. charged that Avianca initiated restructuring proceedings in the U.S. rather than in its home country in an attempt to force U.S. creditors into a restructuring while leaving Colombian-based creditors alone. Avianca's principal place of business and the bulk of its assets are in Colombia, as are nearly all of its employees and operations, the lessors said in separate motions. The U.S. Bankruptcy Court in Manhattan has scheduled a hearing on the dismissal motions for May 8. In response to the lessors' motions, the committee said that the lessors failed to show the presence of either of the elements necessary for a bankruptcy court to abstain from hearing a case - best interest of the debtor and its creditors, or existence of a foreign proceeding. The best interests of both Avianca and its creditors clearly require that the Manhattan court keep jurisdiction, the committee said in the court papers. Noting the airline's worldwide operations - half of its 28 flight destinations are outside of Colombia - and diverse creditor body, the committee said that the U.S. courts are the most central forum for restructuring Avianca's debts. Most of Avianca's major creditors are subject to the Manhattan court's jurisdiction based on their service on the committee or their minimum contacts in the U.S., the filing said. Colombia's own tax collecting agency appeared at the committee's organization meeting and sought appointment to the committee. The committee said it's considering granting Colombian governmental entities "ex officio," or honorary, status as committee members. The committee dismissed the lessors' assertion that Avianca should pursue a Colombian Law 550 insolvency proceeding. A Law 550 proceeding would be unsuitable for reorganizing the Company's business, the committee said, because it would permit lessors such as Pegasus Aviation and Ansett Worldwide to take back their aircraft and sue Avianca for all future rent. Dow Jones also reports that the committee questioned whether Avianca's U.S. affiliate, Avianca Inc., would be able to file for a Law 550 proceeding - to do so, a company must be permanently doing business in Colombia. =========== M E X I C O =========== CINTRA: Reports First Quarter 2003 Results ------------------------------------------ (All figures are expressed in pesos of equivalent purchasing power as of March 31st, 2003, unless specified otherwise. Financial Statements meet Mexican GAAP, and are not audited.) CINTRA, S.A. DE C.V., (BMV:CINTRA) Mexico's leading air transportation system reported its non audited results for the first quarter 2003. The ASK's during 1Q 2003 reported 9,834 million, 3.1% higher than the same period 2002, this capacity growth is due to the increase in routes, particularly in the international portion. The demand expressed in RPK's was 5,685 million during the period January - March 2003, similar to the same period 2002, since the yield reached 1.039 pesos, 1.5% higher than the first quarter 2002; as a consequence of the exchange between the Mexican peso and the U.S. dollar, the ASK/Cost increased 4.8% for the same period in 2002. Revenues Total revenues were 6,797 million pesos, that represents a 1.7% increase in real terms, compared with the period January - March 2002, such increase was generated by the 6.9% rise in the international market, reaching 2,545 million pesos, this was possible due to the new routes opening and the exchange between the Mexican peso and the U.S. dollar; this softened the 2.8% decrease in domestic routes, that represented 3,362 million pesos; however, cargo revenues and other were increased in 4.7% and 6.2% respectively, compared to the same period 2002. It is important to mention that, domestic revenues were affected by the unfair competition from domestic airlines. In U.S. dollars terms, total revenues were 625 million for the first quarter 2003, that shows a 9.6% decrease with respect to the same period 2002, due to the pre-war scheme that caused a decrease in traffic between Mexico and the United States of America. Operating Expenses Operation expenses were 6,722 million pesos, higher in 9.9% than the 1Q 2002. Personnel cost was 2,438 million pesos, higher 1.9% than the same period 2002, this as a result of the agreed salary increases in 2002 compensated with the personnel reduction in Cintra's companies. Jet fuel expenditure was 1,182 million pesos, superior in 52.9% than the same period last year, this rise was due to the significant increase in the jet fuel price and the devaluation of the Mexican peso, which average exchange rate during the quarter was $10.82 Mexican pesos per U.S. dollar than $9.11 Mexican pesos per U.S. dollar during the same period last year, compensated with the jet fuel coverage program that protects the 38% of our 2003 consumptions. Aircraft and traffic servicing were 835 million pesos during the period, 9.1% higher than those in 1Q 2002 as a consequence of the devaluation of the Mexican peso. Maintenance was 715 million pesos during the quarter, 10.1% higher than the same quarter 2002 also as a result of the devaluation of the Mexican peso. Passenger service was 213 million pesos during the first quarter 2003, 5.4% higher than the same period 2002 mainly due to the devaluation of the Mexican peso. Commissions were 497 million pesos, which reflects a 3.7% decrease as a result of the new Incentives Program. Promotion and sales increased 6.2% compared to the period January - March 2002, reaching 391 million pesos, due to the devaluation of the Mexican peso. Insurance figures reached 167 million pesos during the first quarter 2003, higher in 7.1% than the same period 2002, as a consequence of the devaluation of the Mexican peso, since the premiums should be paid in U.S. dollars. Operation expenses during the first quarter 2003 were 619 million dollars that compared to 633 million dollars during the same quarter 2002 represents a 2.3% decrease instead of 9.9% increase that shows the comparison in Mexican pesos. It is important to mention that the exchange rate has distorted the Financial Statements, since the results in Mexican pesos do not allow to compare them realistically against previous periods. Capital Expenses Capital expenses were 1,050 million pesos during 1Q 2003, 7.2% higher than the same period 2002 due to: The aircraft equivalent to 797 million pesos, 14.3% higher than the same quarter last year originated by the fleet renewal and the devaluation of the Mexican peso. Regarding depreciation, it reached 253 million pesos, 10.4% lower than the same period 2002 and it is important to mention that Mexicana's Boeing B-727 aircraft are almost depreciated. Operating Loss During the period January - March 2003 the operation loss was 975 million pesos, compared to 416 million pesos in the same period 2002. As we mentioned previously, the domestic and international markets contraction influenced the results, as well as the devaluation of the Mexican peso. Integral Financing Income Integral Financing Income during the quarter was 108 million pesos, higher than 41 million pesos income during 1Q 2002, financial expenses increased 12.2% during the period, reaching 93 million pesos due to the devaluation of the Mexican peso. Foreign exchange loss was 94 million pesos, compared to 43 million pesos gain during the same quarter 2002, also as a result of the Mexican peso parity. Net loss During the first quarter 2003 Cintra shows a 1,060 million pesos net loss, higher to 431 million pesos in the same period 2002. Relevant events These are the most relevant events during the first quarter 2003: Annual Shareholders' Meeting The Annual Shareholders' Meeting was carried out and the results for the year 2002 were approved. Negotiation of commissions A new commercial strategy was established to provide incentives and economic benefits according to the increase in sales by the travel agencies; this new scheme provoked a reduction of 3.7% in commissions during the period January - March 2002 compared to the same quarter 2002. Increase in the jet fuel price One of the most important events that affected the results of Cintra, compensated with the jet fuel coverage program that protects the 38% of our 2003 consumptions. Foreign exchange The average foreign exchange during the quarter was key in the increase of the Integral Financing Income reaching $10.82 Mexican pesos per U.S. dollar against $9.11 Mexican pesos per U.S. dollar during the same quarter 2002. Cash flow reduction Mainly affected by the two previous points and the decrease in revenue, Cintra's cash flow reduced in approximately 120 million dollars during the first quarter 2003. International routes opening Mexicana started its regular flights to Austin, Texas and since May 1st on will operate regular flights to Portland, Oregon. Also, on April 1st started regular flights to Chetumal, Quintana Roo. Free vacations ("Vacaciones pagadas") During the first quarter 2003 Aeromexico offered to its passengers a drawing to win five years of free vacations with three companions including airline tickets, hotel accomodations and $1,000 U.S. dollars cash on each trip. Aircraft renewal Mexicana continued with its Fleet Renovation Program, leasing two Airbus A-319 and grounding two Boeing B-727/200. Current economic situation The post-war increases the probability of higher worldwide economic instability and consequently, the negative impact in Cintra's companies operation, mainly in a stronger contraction of the markets or in a slow recovery of the demand in air transportation. To see financial statements: http://bankrupt.com/misc/CINTRA.htm CONTACT: CINTRA Xola 535, Piso 16, Col. del Valle 03100 M,xico, D.F., Mexico Phone: +52-5-448-8050 Fax: +52-5-448-8055 Contacts: Jaime Corredor Esnaola, Chairman Juan Dez-Canedo Ruiz, CEO Rodrigo Ocejo Rojo, CFO OR C.P. Francisco Cuevas Feliu, Investor Relations Xola 535, Piso 16 Col. del Valle 03100 M,xico, D.F. Tel. (52) 5 448 80 50 Fax (52) 5 448 80 55 infocintra@cintra.com.mx DESC: 1Q03 Results Show Improvement ----------------------------------- Desc, S.A. de C.V. (NYSE: DES; BMV: DESC) announced today its results for the first quarter ended March 31, 2003 (1Q03). All figures were prepared according to generally accepted accounting principles in Mexico. HIGHLIGHTS During the first quarter of 2003, the Company's EBITDA improved significantly from US$18 million reported during the fourth quarter of 2002, to US$51 million. This result reflects the following: - The initiation of the Tractor Project in the Autoparts Sector for the production of automotive power train components, - Higher sales volumes in the Chemical Sector, and - Improved results from the Real Estate Sector due to higher sales from the Punta Mita project. Year-over-year the results for the first quarter of 2003 reflect a decline caused by: - Lower sales in the Autoparts Sector as a result of the ongoing temporary shutdowns in some of the assembly plants in order to reduce inventory levels, and the closing of the Daimler Chrysler Lago Alberto Plant in Mexico City, - In the Chemical Sector, the pressure on sales prices due to the worldwide oversupply, as well as the increase in main raw material prices, and - Increases in the cost of raw materials in the Food Branded Products business. SALES During the first quarter, sales increased 9.8% when compared to 4Q02, from US$430 million to US$471 million. This result reflects the initiation of the Tractor Project in the Autoparts Sector, as well as price increases and higher sales volumes in the Chemical Sector and sales related with the Punta Mita project in the Real Estate Sector. When compared to 1Q02, revenues declined 7.0% to US$471 million from US$507 million. This result was due to the 24.7% decline in revenues from the Autoparts Sector caused by the drop in production volumes of OEM's, the closing of the Daimler Chrysler plant in Mexico City, and, despite the recovery Q-o-Q, the declining industry trend mentioned during previous quarters. Revenues from the Chemical Sector increased 21.2% when compared to 1Q02, as a result of the repositioning of inventories by some clients and a greater demand in the detergent market. Sales in the Food Sector declined 8.0% when compared to 1Q02 due to the closing of the Pork Business in the Bajio region. However, it is important to note that the pork operation in Yucatan is showing positive results. Sales from the Real Estate Sector declined 9.7% when compared to 1Q02 because estimated sales in the Bosques de Santa Fe project were not achieved. EXPORTS Quarter-over-quarter total exports increased 14.9% due to higher sales from the Autoparts and Chemical Sectors. Compared to the same quarter of 2002, exports declined 5.6% from US$228 million in 1Q02 to US$216 million in 1Q03. This result is due to the 25.7% decline in the Autoparts Sector, which was not offset by the 57.9% and 2.4% increases in the Chemical and Food Sectors, respectively. During the quarter, exports represented 45.8% of total sales. OPERATING INCOME (LOSS), MARGIN AND EBITDA Compared to the fourth quarter of 2002, operating income increased more than 100% from a US$17 million loss to a US$20 million income. Compared to 1Q02 operating income declined 48.7%. EBITDA for the first quarter was US$51 million, a 183.3% increase when compared to the previous quarter. Compared to the same quarter of 2002, EBITDA declined 27.1%. TAXES During the quarter, tax provisions were US$10 million, which included Income and Asset Taxes and Employee Profit Sharing. Deferred taxes had a net effect in the amount of US$2 million. NET MAJORITY INCOME (LOSS) Net majority loss for the first quarter of 2003 was US$30 million, as a result of exchange rate losses. DEBT STRUCTURE At the close of the first quarter of 2003, Desc's results posted a significant improvement when compared to the fourth quarter of 2002. However, due primarily to the effects derived from the depreciation of the peso/dollar exchange rate during 1Q03, Desc did not achieve the leverage ratio target set forth in the credit contracts signed with Citibank N.A. and a bank syndicate on June 10, 2002 and with BBVA Bancomer S.A. and a bank syndicate on May 27, 2002. All other contractual obligations have been met, including interest and principal payments. To date, Desc has informed these lenders that it has not met the leverage ratio and is negotiating a corresponding waiver with the lenders. During 1Q03, Desc registered a net debt increase of US$33 million when compared to 4Q02, due to the reduction in cash levels generated mainly by higher working capital requirements and dividend payments. At the end of the first quarter of 2003, the debt composition was 69% dollar-denominated and 31% peso-denominated. The average cost of debt was 4.5% in dollars and 9.7% in pesos, compared to 4.8% and 10.4%, respectively in 1Q02. RESULTS BY SECTOR AUTOPARTS SECTOR Q-o-Q sales increased 8.2% and operating income went from a US$9 million loss to an income of US$11 million. This was due to the 65.3% increase in sale volumes in propeller shafts and 23.6% in axles, while front half-axles started being manufactured as a result of the Tractor Project. Sales for the quarter declined 24.7% when compared to 1Q02 mainly due to the inertia in the automotive industry at the end of 2002. As a result, sales volumes remained low reflecting the decline in orders from OEMs in the U.S. and Mexico, the continued temporary shutdown in some assembly plants (GM, FORD, NISSAN, VW and DAIMLERCHRYSLER) with the purpose of adjusting inventories and the closing of the DaimlerChrysler Lago Alberto plant, which impacted the axle, propeller shaft and pick-up box businesses. As a result of the above, operating income was US$11 million while operating margin reached 6.0%. The variation in volumes sold in 1Q03, compared to the same quarter of 2002, reflect the increase in aluminum wheels by 108.0%, cv joints by 16.4%, tappets by 63.3%, and output shafts - a new export product derived from the Tractor Project - by 100%. Compared to the first quarter of 2002, the most significant volume declines were registered in transmissions components 19.6%, pick-up boxes 59.9%, axles 50.0%, pistons 33.3%, light transmissions 23.9%, heavy-duty transmissions 31.0% and steel wheels 14.7%. Exports during 1Q03 increased 14.1% compared to 4Q02 from US$102 million to US$117 million. Yo-Y exports declined 25.7%. The average capacity utilization of the transmissions, stamping, axles and cv joints businesses was approximately 54.0%. Sales per employee increased to US$111.4 thousand, from US$110.4 thousand in the same period of the previous year. This improvement reflects the layoffs that took place during 2002. Mexico's total vehicle production, accumulated as of March 2003, was 400,944 units, which represents a 14.0% decline when compared to the same period of 2002. CHEMICAL SECTOR During the quarter sales increased 21.2% compared to 1Q02, as a result of the repositioning of inventories by some clients mainly in Europe and the U.S. in the rubber solution and polystyrene businesses. On one hand, the phosphates business benefited from the demand derived from detergent production, which was higher than expected. On the other hand, sales from the adhesive and waterproofing businesses declined due to the lower activity in government construction projects. The combination of the pressure on sales prices as a result of the global oversupply of petrochemicals and the increase in the prices of main raw materials and energy products, which were not able to be passed on completely to sales prices, affected the operating income and EBITDA which reached US$4 million and US$12 million, representing a decline of 57.4% and 24.8%, respectiv ely. Q-o-Q sales increased 8.5% and operating margin went from 0.2% to 2.0% in 1Q03. Capacity utilization in the Chemical Sector surpassed 90%, despite the tight margins. Operating margins are expected to recover when pressures on raw material prices decline. Exports for the quarter increased 57.9% from US$46 million in 1Q02 to US$73 million in 1Q03. This increase partially offset the decline in demand from the Mexican market. FOOD SECTOR Branded Products The 12.0% increase in sales of branded products Y-o-Y reflects the solid performance of the "Del Fuerte" tomato puree brand, the "Embasa" ketchup style salsa brand and the increase in coffee exports to the U.S., coupled with the 9% average increase in all product categories and a 21.0% increase in the "La Gloria" corn oil brand. In addition, it reflects a market share increase in all the products in the local and U.S. markets. In addition, revenues were benefited by the new line of "Del Fuerte" chile and salsa as well as the distribution of "Ybarra" canned tuna. These factors have helped to compensated the drop in economic activity in Mexico and the U.S. The operating margin declined from 4.7% during 1Q02 to 1.0% in 1Q03 due to the significant increase in the cost of the main raw materials, which was not offset by the previously mentioned price increases. Pork Business During the quarter, sales in the Pork Business declined 32.5% compared to the same period of 2002 due to the closing of the Bajio region operations. The operating margin was 1.2% which was above the -4.4% reported in 1Q02, as a result of the closing of the Bajio region operations. The depreciation of the peso versus the dollar negatively impacted the results since some of the raw materials used for the production of feed maintained its price related to the dollar. Sales volumes from the Southeast operations increased 2.7% compared to 1Q02 and capacity utilization was 100%. REAL ESTATE SECTOR Sales in 1Q03 reached US$21 million, a decline of 9.7% when compared to 1Q02, reflecting sales from the Punta Mita and Bosques de Santa Fe projects, which contributed approximately 71.0% and 25.0% of the revenue for the quarter, respectively. Compared to the previous quarter, the results from the real estate sector significantly recovered due to the sale of lots in the projects mentioned above. Operating income reached US$5 million while the operating margin increased to 24.7% from 14.1% during 1Q02. This result was mainly due to the sales mix, since the lots from Punta Mita represent one of the products with the highest profit ability for the Sector. For this reason an intense effort has been made regarding the sale and promotion of the large lots denominated "Ranchos" and the residential lost with ocean and golf course views. CONTACTS: Marisol V zquez-Mellado Alejandro de la Barreda / Carolina Rend�n Tel.: (5255) 5261 8037 abarredag@mail.desc.com.mx GRUPO MEXICO: First Quarter 2003 CEO Report ------------------------------------------- Financial Highlights Grupo Mexico (G.Mexico) consolidated financial results for the first quarter ended on March 31, 2003, included the operations of Americas Mining Corporation (AMC) and Grupo Ferroviario Mexicano (GFM) which consolidate the results of the operating companies: Minera Mexico (MM), ASARCO, Southern Peru Copper Corporation (SPCC), Grupo Ferroviario Mexicano (GFM) and Ferromex. Applies to US GAAP: G.Mexico consolidated results for the first quarter ending March 31, 2003 are highlighted by improved efficiencies that allowed us to obtain significant operating and administrative cost savings at all of our subsidiaries, despite an increase on power and energy. These savings were the result of various measures, including incremental productivity in the operating companies of the Group and to a significant contribution from the railroad division. At March 31, 2003 reductions in costs and expenses added $58.7 million representing a 12.2% improvement compared to the same period of the previous year. This decrease in costs and expenses also allowed us to mitigate the effect of the reduction of copper sales (20.8%) and zinc (29.6%). G Mexico.s consolidated sales as of March 31, 2003 were $539.2 million, compared to $630.8 million during the same period of the previous year. This decrease can be attributed primarily to the following reasons: In the case of Ferromex we had the same volume of transportation, however, the negative effects of the imports and exports originated by the global circumstances, also the effect of the foreign exchange rate, that registered in average of 18.5% devaluation in the first quarter of 2003 compared to the same period a year ago, which affected income from the railroad transport services. Regarding the mining division, the sales reduction was due basically to our strategy of favoring margin over volume, as well to the negative impact due to the operational cutback in the Mission, USA mine and the labor strike in Mexicana de Cananea, in addition to the liquidity problems manifest during the period of the financial restructuring, which caused negative impact in the operation of the mines and plants of the mining sector in Mexico and the United States. At March 31, 2003 the operating cash flow (EBITDA) was $116.6 million, representing 21.6% of sales compared to 23.7% during the same period of the previous year. The operating earnings as of March 31, 2003, were $44.7 million dollars representing 8.3% of sales compared to 12.7% during the same period of the previous year. Investments The investment program carried out during the year has reached $43.9million, of which $30.4 million corresponds to the mining division, that is mostly related to cost in stripping ore of $17.8 million that will allow to access higher-grade mineral zones. The railroad division invested $13.5 million on the construction, rehabilitation of tracks, terminals and a new vehicle terminal in Guadalajara. Financing Grupo Mexico announced on March 30, 2003 that it has signed and received funding of a loan for $200 million with a syndicate of banks led by J.P. Morgan-Chase and Bank of America. This credit replaces an agreement originally reached with Barclay's, which decided to back away from its commitment in the restructuring that currently is taken by eleven banks. Upon consummating this negotiation, the $310 million loan signed February 28 with Banco Inbursa has also been funded. As a result, the Americas Mining Corporation (AMC) subsidiary receives new resources and today acquires 54.4 percent of the shares of Southern Peru Copper Corporation. AMC assumes control of these shares, which are now collateral for the Inbursa loan. With the completion of these joint operations, Asarco reduces its net debt to 226 million dollars that represents a reduction of 77 percent of its overall debt, canceling 100 percent of short-term debt in the amount of $550 million and assures its viability under current market conditions, and Grupo Mexico improves its general debt profile. The participating banks in the aforementioned credit are J. P. Morgan-Chase Bank, Bank of America, The Bank of Nova Scotia, BNP Paribas, Banamex-City Group, Dresdner Bank, Westdeutsche Landesbank, The Royal Bank of Canada, Deutsche Bank, Credite Agricole Indosuez y BBVA-Bancomer. With this transaction, Grupo Mexico completed the financial restructure of Asarco, Inc. The total debt outstanding at March 31, 2002, was $2,906.1 million, with available cash of $351.5 million and that is equivalent to a net debt of $2,554.6 million dollars. On April 29, 2003, Grupo M�xico, S.A. de C.V. (GM) reported that its subsidiary Grupo Minero M�xico, S.A. de C.V., GMM, which concentrates its whole mining operations in Mexico, has concluded and signed its financial restructuring with both, the institutional investors that are holders of its issued Secured Export Notes and with the banks lead by Bank of America, N.A. The Agreements restructure credits for $608.9 Million Dollars, now payable in March 2007, and credits for $270.3 Million Dollars that will be payable in quarterly installments starting in March 2004. In sum, credits for a total of $879.2 Million Dollars were restructured. As part of the agreements executed today the holding company of G.Mexico's mining assets, Americas Mining Corporation (AMC), will capitalize GMM with $110 Million Dollars to support its financial structure and ensure the development of operations of the latter and its subsidiaries. With the foregoing, together with the recent payment of $550 Million Dollar credits owed by its subsidiary Asarco Incorporated (ASARCO), which was made last March 31, G.Mexico concludes its financial restructuration. Mr. Germ n Larrea M.V., Chairman of the Board and CEO of G.Mexico stated: Having successfully concluded this financial restructure, that implied a remarkable complexity given the number of institutional investors, banking institutions and agencies of the U.S. Government involved, Grupo M�xico and its subsidiaries will have now more financial and operational flexibility to fully focus on increasing the productivity and profitability of its various mining and metallurgical units even in the period of depressed prices that the industry is facing. It is to highlight that both Asarco and GMM have a solid financial structure that will enable them to enhance its daily operations and better confront the current low metal price cycle. In fact the next maturity for Asarco is in April 2013. For its part, GMM, thanks the referred restructuring, has a better debt profile in accordance with its financial capabilities at the current metal prices. With regard to G.M�xico's subsidiary Southern Peru Copper Corporation (SPCC) that consolidates the Peruvian mining operations, its financial structure is very solid and has an approved bond issue program of up to $750 Million Dollars and a cash of around $200 Million Dollars. Part of these resources will be devoted for the Ilo smelter modernization. Finally, G.Mexico stressed that its transport subsidiaries have a very efficient financial and operational structure. MINING DIVISION Americas Mining Corporation (AMC) At March 31, 2003, sales were $413.5 million compared to $488.6 million in 2002. This decrease can be attributed primarily to lower volumes sold. During year 2003, sales volumes for copper registered a total reduction of 50,148 metric tons, 20.8% lower than the same period in 2002. Zinc and silver have also shown the same trend with a decrease of 29.6% and 8.4% respectively during the same period. The sales reduction was due basically to our strategy of favoring margin over volume, as well to the negative impact due to the operational cutback in the Mission, USA mine and the labor strike in Mexicana de Cananea, in addition to the liquidity problems manifest during the period of the financial restructuring, which caused negative impact in the operation of the mines and plants of the mining sector in Mexico and the United States. EBITDA for the first quarter of 2003 was $73.1 million dollars, 27.8% lower than the same period of the previous year. The operating earnings at March 31, 2003 was $20.4 million, which represented a reduction of 63.1% compared with the same period of the previous year, due to a significant reduction in sales. Net financing costs for the first quarter of 2003 was $46.4 million dollars, 4.6% lower than to the same period of the previous year of $48.6 million, due basically to the reduction of a bank loan with SPCC. The net loss after taxes at March 31, 2003 was $38.5 million dollars, 5.5% higher than the same period of 2002 by amount $36.5 million dollars. RAILROAD DIVISION Grupo Ferroviario Mexicano (GFM) During the first quarter of 2003, revenues from railroad transport services decrease 13.2% against the same period of 2002. Despite the same level of transport volumes, the negative effects of the imports and exports originated by the global circumstances, also the effect of the foreign exchange rate, that registered in average of 18.5% devaluation in the first quarter of 2003 compared to the same period a year ago, which affected the income reduction by 13.2% compared to the same period last year. With respect to investment projects and acquisition of other assets, Grupo Ferroviario invested $13.5 million during the first quarter of 2003, for the construction, expansion and rehabilitation of tracks, terminals, rail yards, rehabilitation of tracks, terminals and a new vehicle terminal in Guadalajara. On March 31, 2003, GFM closed a $200 million loan agreement leaded by JP Morgan Chase, Bank of America and other banks. First quarter 2003 EBITDA for GFM was $42.4 million, which represented 33% of sales and compares with a 20.6% reduction in EBITDA over the same period last year, due primarily to higher cost for diesel which represented approximately $5.0 million during the first quarter. Applies to Mexican GAAP: Grupo M�xico - Financial Highlights G.Mexico consolidated results for the first quarter ended March 31, 2003 are highlighted by improved efficiencies that allowed us to obtain significant operating and administrative cost savings at all of our subsidiaries, and to a significant contribution to the Group by the railroad division. At March 31, 2003 the reduction in cost reached $61.6 million pesos, which represented 1.3% compared to the same period of the previous year. This decrease allowed us to mitigate the effect in the results of the reduction of copper sales (20.8%) and zinc sales (29.6%). G.Mexico consolidated and accumulated sales at March 31, 2003 was $5,909.0 million pesos, compared to $6,082.3 million pesos for the same period of 2002. This decrease can be attributed primarily to lower volumes sold, and to the policy to privilege margins over volumes. The operating cash flow (EBITDA) for the first quarter ended March 31, 2003 was $1,396.4 million pesos representing 23.6% of sales compared to 24.8% during the same period of the previous year. G.Mexico.s as of March 31, 2003 operating earnings was $355.4 million pesos represented 6.0% of sales. With respect to the consolidated financial cost, based in Mexican GAAP, this represents a net cost of $518.2 million pesos at March 31, 2003, due basically to a the financial debt cost of $548.9 million pesos, for the monetary position profit of $604.7 million pesos, a profit in derivatives for $0.1million pesos, and a loss in foreign exchange due basically to the devaluation of the Mexican peso against the dollar for $574.0 million pesos. Other Events: Grupo Mexico announced on March 30, 2003 that it has signed and received funding of a loan for $200 million with a syndicate of banks led by J.P. Morgan-Chase and Bank of America. This credit replaces an agreement originally reached with Barclay's, which decided to back away from its commitment in the restructuring that currently is taken by eleven banks. Upon consummating this negotiation, the $310 million loan signed February 28 with Banco Inbursa has also been funded. As a result, the Americas Mining Corporation (AMC) subsidiary receives new resources and today acquires 54.4 percent of the shares of Southern Peru Copper Corporation. AMC assumes control of these shares, which are now collateral for the Inbursa loan. With the completion of these joint operations, Asarco reduces its net debt to 226 million dollars that represents a reduction of 77 percent of its overall debt, canceling 100 percent of short-term debt in the amount of $550 million and assures its viability under current market conditions, and Grupo Mexico improves its general debt profile. The participating banks in the aforementioned credit are J. P. Morgan-Chase Bank, Bank of America, The Bank of Nova Scotia, BNP Paribas, Banamex-City Group, Dresdner Bank, Westdeutsche Landesbank, The Royal Bank of Canada, Deutsche Bank, Credite Agricole Indosuez y BBVA-Bancomer. With this transaction, Grupo Mexico completed the financial restructure of Asarco, Inc. The total debt outstanding at March 31, 2002, was $2,906.1 million, with available cash of $351.5 million and that is equivalent to a net debt of $2,554.6 million dollars. On April 29, 2003, Grupo M�xico, S.A. de C.V. (GM) reported that its subsidiary Grupo Minero M�xico, S.A. de C.V., GMM, which concentrates its whole mining operations in Mexico, has concluded and signed its financial restructuring with both, the institutional investors that are holders of its issued Secured Export Notes and with the banks lead by Bank of America, N.A. The Agreements restructure credits for $608.9 Million Dollars, now payable in March 2007, and credits for $270.3 Million Dollars that will be payable in quarterly installments starting in March 2004. In sum, credits for a total of $879.2 Million Dollars were restructured. As part of the agreements executed today the holding company of G.Mexico.s mining assets, Americas Mining Corporation (AMC), will capitalize GMM with $110 Million Dollars to support its financial structure and ensure the development of operations of the latter and its subsidiaries. With the foregoing, together with the recent payment of $550 Million Dollar credits owed by its subsidiary Asarco Incorporated (ASARCO), which was made last March 31, G-MEXICO concludes its financial restructuration. Mr. Germ n Larrea M.V., Chairman of the Board and CEO of G.Mexico stated: Having successfully concluded this financial restructure, that implied a remarkable complexity given the number of institutional investors, banking institutions and agencies of the U.S. Government involved, Grupo M�xico and its subsidiaries will have now more financial and operational flexibility to fully focus on increasing the productivity and profitability of its various mining and metallurgical units even in the period of depressed prices that the industry is facing. It is to highlight that both Asarco and GMM have a solid financial structure that will enable them to enhance its daily operations and better confront the current low metal price cycle. In fact the next maturity for Asarco is in April 2013. For its part, GMM, thanks the referred restructuring, has a better debt profile in accordance with its financial capabilities at the current metal prices. With regard to G.M�xico's subsidiary Southern Peru Copper Corporation (SPCC) that consolidates the Peruvian mining operations, its financial structure is very solid and has an approved bond issue program of up to $750 Million Dollars and a cash of around $200 Million Dollars. Part of these resources will be devoted for the Ilo smelter modernization. Finally, G.Mexico stressed that its transport subsidiaries have a very efficient financial and operational structure. GRUPO MINERO MEXICO: Fitch Ratings Affirms SENs Ratings ------------------------------------------------------- Fitch Ratings has affirmed the following ratings for Grupo Minero Mexico, S.A. de C.V. (GMM): the 'B' ratings for GMM's Grupo Mexico Export Master Trust No. 1 (SEN) Series C and Series D notes; and the 'AAA' rating for GMM's Series E SEN notes. Fitch has upgraded GMM's guaranteed senior notes due in 2008 and 2028 (the Yankee bonds) to 'B' from 'B-' due to a new security interest provided to all creditors under the recent restructuring agreement. The bondholders were unsecured prior to the debt restructuring; all other terms and conditions are unchanged. GMM has continued to remain current with all payment obligations associated with the Yankee bonds. The Rating Outlook for all of GMM's ratings is now Stable. Series C and Series D notes and the guaranteed senior notes due in 2008 and 2028 are no longer on Rating Watch Negative. Fitch has withdrawn the 'B+' rating of GMM's Series B1 SEN notes as this obligation has been paid in full. These rating actions follow the successful closing of a restructuring agreement between GMM and its creditors (banks and SENs holders). The agreement includes the requirement that GMM's indirect parent company, Grupo Mexico S.A. de C.V. (Grupo Mexico), inject approximately US$110 million of new capital into GMM primarily for working capital purposes. GMM's liquidity will also be strengthened by the releasing of approximately US$50 million in exports revenues that had been trapped and under the control of the SENs holders/trustee. GMM has faced major liquidity problems since the downgrade of its SENs obligations on Oct 5, 2001, which triggered an early amortization event that led to the trapping of export cash flows by the trustee. The restructured obligations total approximately US$879 million, including US$473 million of secured export notes (SENs) and US$406 million of bank debt. The restructured debt has two tranches. Tranche A totals US$270 million and amortizes in years 2004-2007. Tranche B totals US$609 million and amortizes entirely in March 2007. The rating of the Series C SENs were affirmed at 'B' based on the terms at restructuring, which in Fitch's view provide incremental compensation for extending the maturity of the notes sufficient to prevent a loss of present value to the original noteholders. Series C Noteholders will be receiving a higher interest rate of 10.26% (vs. the original rate of 8.51% at issuance), an additional payment-in-kind (PIK) due at maturity of 0.75% and a 0.5% restructuring fee. The current spread to comparable treasury bonds represents an increased risk premium when compared to the spread at issuance. Although the final maturity of this series is still in 2007 as under the original terms, more principal (US$145 million) is scheduled to amortize in 2007 than was originally scheduled (US$11 million). Noteholders also benefit from a new security package given to all creditors shared on a pari-passu basis. The new security package includes a security interest in substantially all the assets of GMM except domestic receivables. SENs holders will continue to maintain an exclusive security interest in existing and future export receivables as well as control of the cash from export sales. The ratings of the Series D SENs were affirmed at 'B' since holders will be receiving a higher interest rate of 11.18% vs. the original rate of 9.43% at issuance and a final amortization payment in 2007 (vs. 2010 under the original terms). Such terms, in Fitch's judgement, provide incremental compensation sufficient to prevent a loss of present value to the original noteholders. In addition, holders of Series D SENs are entitled to a make- whole payment (up to a maximum of US$10 million) in the event of early amortization. The rating of the Series E Export Master Trust No. 1 notes were affirmed at 'AAA' due to a surety bond provided by MBIA that guarantees the timely payment of interest and the ultimate payment of principal. The claims paying ability of MBIA Insurance is rated 'AAA' by Fitch. The rating of the guaranteed senior notes due in 2008 and 2028 (Yankee bonds) were upgraded to 'B' from 'B-'. These bonds were not involved in this restructuring. However, as a result of the restructuring, holders of these originally unsecured bonds will have a security interest, together with essentially all creditors, in the assets of the entire company, except for domestic and export receivables. As prior to the restructuring, only the SENs holders will continue to benefit from the existing and future export receivables and from the right to control of such cash flows should certain cash trapping events occur. The 'B' rating continues to reflect GMM's high leverage post restructuring. GMM should generate about US$130 million in EBITDA in 2003. Should copper prices continue to remain depressed in the $0.70 to $0.80 per pound range, the company's leverage, as measured by total debt-to-EBITDA, could range from approximately 10.0 times (x) to 7.0x and interest coverage could range from approximately 1.0x to 1.5x. Following this restructuring, GMM's copper mining assets, competitive cost structure and long-term business fundamentals should allow the company to produce reasonably healthy cash flows at more normal copper prices versus today's depressed prices. GMM is a wholly owned subsidiary of Grupo Mexico, Mexico's largest mining company, with assets in the United States (Asarco) and Peru (Southern Peru Copper Company). GMM's principal copper mining facilities, Mexicana de Cobre and Mexicana de Cananea, are located in northern Mexico and include two open-pit copper mines with a cash cost of production of about $0.54 per pound in 2002. Copper sales of about 279,673 tonnes in 2002 accounted for approximately two-thirds of GMM's revenues. Through Industrial Minera Mexico (IMMSA), which operates several underground polymetallic mines, GMM also produces zinc, gold, silver, molybdenum, lead, and sulfuric acid. CONTACTS: Anita Saha CFA, +1-312-368-3179, Chicago Joe Bormann CFA, +1-312-368-3349, Chicago Daniel Kastholm, CFA, +1-312-368-2070, Chicago Greg Kabance, +1-312-368-2052, Chicago MEDIA RELATIONS: Matt Burkhard +1-212-908-0540, New York SAVIA: 1Q03 Numbers Show Better Revenues, Margins ------------------------------------------------- Savia S.A. de C.V. (NYSE:VAI) (BMV:SAVIA) announced Wednesday its results for the first quarter of 2003. EXECUTIVE SUMMARY -- Savia improved its operating income by $39 million, figure 1.7% higher than reported on the first quarter of 2002. -- Savia reported consolidated net income by $23 million an 11.5% of improvement compared to the same period last year. Its operating cash flow was $44 million, a similar figure than reported in the same period last year. -- Seminis registered sales of $160 million, a similar value to that achieved in the same period previous year, as well as the gross margin maintained a 64% compared to the same period last year. Its operating cash flow was $45 million. REPORTED RESULTS Main Business Indicators Million of dollars as of March 2003 Jan-March 2003 Jan-March 2002 Variation -------------------------------------------- Sales 198 214 -7.7% Gross Profit 108 108 -0.3% Gross Profit 54.4% 50.4% Operating Expenses 69 70 1.4% Operating Income 39 38 1.7% EBIT DA 44 44 -0.5% Consolidated Net Income 23 21 11.5% Majority Net Income 13 10 21.3% FIRST QUARTER CONSOLIDATED RESULTS 2003 Consolidated Net Sales Consolidated net sales reached $198 million, which represents a decrease of 7.7% compared to the same period last year. This reduction is primarily due to a decrease in the hectares sown by Agrobionova, a subsidiary of Bionova. Of the reported sales, 42% were denominated in dollars, 29% in euros, 12% in Mexican pesos and 17% in other currencies. Consolidated Operating Income Consolidated operating income was $39 million, an improvement of $1 million (1.7%) compared to the same period last year. This result was mainly due to the reduction in the Bionova's operating expenses and the Corporate expenses also. The operating cash flow reached $44 million, similar figure in comparison to the same period last year. Consolidated Income During this period, majority net income was $13 million, an increase of 21.3% respect to that reported in the first quarter of 2002. Consolidated net income was $23 million, $2 million higher than the obtained in the same period last year. FIRST QUARTER RESULTS 2003 FOR THE MAIN SUBSIDIARIES Seminis Total sales for the first quarter of 2003 reached $160 million, similar value to the reported sales in the same period last year. The operating gross profit for this period was 64% of the business sales. The operating income reported was $42 million, $1 million less than the first quarter of 2002. This decrease was mainly a result of an increase in the operating expenses by $4 million in comparison to the same period last year. The operating cash flow reached $45 million, a decrease of 4% compared to $47 million for the first quarter of 2002. Bionova The sales of Bionova reported $28 million, which represents a decrease of 42.2% compared to last year's sales for the same period. This reduction is the result of decrease in the operation of Agrobionova. Operating loss was $1 million, a decrease of 122% in comparison to $3 million of operating income reported in the same period last year. RELEVANT EVENT Savia and Fox Paine & Company had extended through May 15, 2003 the non-binding Letter of Intent signed on Dec. 13, 2002. Under the terms of this letter Fox Paine and parties related to Savia will acquire the outstanding shares of Seminis (Nasdaq:SMNS). This transaction is subject to conditions established by the agreement. Also, Savia continues its negotiations for the payment of its bank debt. These negotiations are directly related to the Letter of Intent above mentioned. Savia participates in industries that offer high growth potential in Mexico and internationally. Its principal subsidiaries include Seminis, a global leader in the production and marketing of fruit and vegetable seeds, Bionova, a company focused on the production, distribution and commercialization of fruits and vegetables and Desarrollo Inmobiliario Omega, a company dedicated to the development of real estate in Northern Mexico. Savia's financial statements are prepared in compliance with generally accepted accounting principles in Mexico. For the consolidation of domestic subsidiaries, Savia follows the guidelines set forth in bulletin B-10 and for foreign companies follows the guidelines set forth in bulletin B-15. Seminis and Bionova report following the generally accepted accounting principles of the United States (GAAP) that differ from the generally accepted accounting principles of Mexico. These results are adjusted to reflect the above-mentioned guidelines. In addition, Seminis reports its fiscal year the first quarter of October through the last of September. Savia reports its fiscal year on a calendar basis, including in its consolidated results the operations of Seminis according to calendar year. To see financial statements: http://bankrupt.com/misc/Savia.htm CONTACT: Savia S.A. de C.V., Monterrey Investor Relations: Francisco Garza, 81-81-73-55-00 or Media Contact: Francisco del Cueto, 55-56-62-31-98 SAVIA: Shareholders Approve Sale of Seminis ------------------------------------------- Savia S.A. de C.V. (Savia) (BMV:SAVIA) (NYSE:VAI) announced that in the extraordinary shareholders meeting that took place Wednesday, they approved the sale of the shares of its subsidiary Seminis Inc. to Fox Paine & Company L.L.C. (Fox Paine) a private equity firm based on San Francisco, Calif. This transaction is subject to conditions established by the Letter of Intent signed on Dec. 13, 2002. In addition, they approved the payment of a cash dividend of U.S.$0.5338 dollars (zero point five three three eight dollar) per Savia's outstanding shares. This payment is subject to the suspensive condition for Savia to close the above-mentioned transaction with Fox Paine. Savia S.A. de C.V. (www.savia.com.mx) participates in industries that offer high growth potential in Mexico and internationally. Its principal subsidiaries include Seminis, a global leader in the production and marketing of fruit and vegetable seeds; Bionova, a company focused on the production, distribution and commercialization of fruits and vegetables; and Desarrollo Inmobiliario Omega, a company dedicated to the development of real estate in Northern Mexico. Seminis Inc. (www.seminis.com) is the world's largest developer, producer and marketer of vegetable seeds. The company uses seeds as the delivery vehicle for innovative agricultural technology. Its products are designed to reduce the need for agricultural chemicals, increase crop yield, reduce spoilage, offer longer shelf life, create better-tasting foods and foods with better nutritional content. Seminis has established a worldwide presence and global distribution network that spans 150 countries and territories. SIDEAPA: Moody's Assigns `Ba3.mx' National Scale Rating ------------------------------------------------------- Durango state waterworks company Sistema Descentralizado de Agua Potable y Alcantarillado (Sideapa) was assigned a Ba3.mx (Mexico national scale) and a B3 (global scale, local currency) issuer ratings by International investors services agency Moody's. According to Moody's, the ratings reflect a mixed bag of economic and operational indicators for the utility, including the Company's weak financial position and fee raising constraints, past delays in payments and sizeable capital investment needs. However, according to Business News Americas, the Company has a stable and growing customer base and is likely to benefit in the medium term from an agreement with national water commission CNA. Revenues are projected to rise by as much as 40 percent this year, as discounts on water bills will be removed. However, Sideapa might not directly benefit from this, as the extra income will go to CAN for water rights. The report adds that the annual debt service requirement is putting a strain on the Company's weak financial profile. But the Company's biggest problem, arguably, is its outdated infrastructure. Business News Americas says that efforts to upgrade its infrastructure are hindered by the Company's reluctance to increase water fees, resulting in low liquidity levels. Sideapa has been seeking financial help from the municipality. Sideapa provides drinking water and sewerage services to 130,000 clients in Durango, where the municipal area has 96 percent and 94 percent water and sewerage coverage respectively. UNEFON: Posts Bigger Net Loss In The 1Q03 ----------------------------------------- Mexican mobile operator Unefon widened its net loss in the first quarter of this year due to increasing financing costs that hit the Company's revenues and EBITDA. According to Business News Americas, the Company posted a MXN102- million (US$9.5mn today) net loss in the first quarter of 2003 - that's 11% higher than the MXN91.3-million net loss in the comparable period last year. Unefon's financing costs soared to MXN175 million in the first quarter of 2003, from MXN3.6 million in the same quarter last year. These costs break down into a MXN103-million foreign exchange loss, net interest cost of MXN120 million, monetary gain of MXN56.3 million, and other financial costs totaling MXN7.5 million. Total revenues grew 44% year-on-year to reach MXN957 million and EBITDA more than quadrupled at MXN283 million. The Company ended the quarter with a long-term debt totaling MXN4.5 billion, mostly in the form of a US$300-million vendor financing debt with Canada's Nortel Networks. Unefon's major shareholders are Moises Saba and TV Azteca (33%). CONTACT: Unefon S.A. De CV Head Office EdificioA Puriferico Sur 4119 Fuentes del Pedregal Mexico DF Mexico 14141 Tel: +52 8582 50000 Fax: +52 8582 5052 Web site: http://www.unefon.com.mx/ Contacts: Engr Moises M. Saba, Chairman Pedro L. Padilla, Vice Chairman ================================= T R I N I D A D & T O B A G O ================================= BWIA: SE Grants Deadline Extension on 2002 Annual Report Filing --------------------------------------------------------------- The Trinidad and Tobago Stock Exchange Limited wishes to advise the investing public that is has granted BWIA a month extension to May 30, 2003, to file its annual report with the Exchange in accordance with the provisions of Clause 6 of the Listing requirements, the Trinidad Guardian reports, citing a statement from the Stock Exchange. However, BWIA assured the Exchange that its audited financial consolidated results are "in the final stages of completion." BWIA reportedly asked for an extension to file its 2002 annual report, as it failed to meet the original April 30 deadline. The report is normally due to be completed four months after the airline's December 31, year-end. BWIA spokesman Clint Williams explains that the airline's request for the extension was "purely a matter of so much going on, we needed a little extra time. Instead of being late, we asked for the extension up front." BWIA was reportedly the only company that asked for a deadline extension in the country. CONTACT: BRITISH WEST INDIES AIRWAYS Phone: + 868 627 2942 E-mail: mailto:mail@bwee.com Home Page: http://www.bwee.com/ Contacts: Conrad Aleong, President and CEO (Trinidad) Beatrix Carrington, VP Marketing and Sales (Barbados) Paul Schutz, CFO (Trinidad) ============= U R U G U A Y ============= BBVA URUGUAY: S&P Affirms Local, Foreign Currency Credit Ratings ---------------------------------------------------------------- Standard & Poor's Ratings Services said Wednesday that it revised its outlooks on its long-term local and foreign currency credit ratings on Uruguayan banks to stable from negative. Standard & Poor's also affirmed its 'CCC' long-term local and foreign currency credit ratings on Banco Bilbao Vizcaya Argentaria Uruguay S.A., Discount Bank Latin America S.A., Citibank N.A. (Uruguay Branch), and American Express Bank (Uruguay) S.A. The stable outlook reflects Standard & Poor's expectations that the recently announced exchange offer to holders of Uruguayan government bonds will not have a negative affect on the rated financial entities. "The previously highly volatile financial environment in Uruguay appears to have stabilized and the rated entities are in comfortable liquidity positions," said credit analyst Carina Lopez. As Standard & Poor's considers the transaction proposed by the government to be a distressed exchange, if the exchange offer is successful, Standard & Poor's will lower the republic's sovereign rating to selective default ('SD') and the exchanged bonds will be rated 'D'. If the new offer closes (on or around May 21, 2003), Standard & Poor's will consider the 'SD' to be cured and the long-term sovereign credit ratings on Uruguay could be raised to the low 'B' category, reflecting a forward-looking assessment of the republic's creditworthiness. In this scenario, banks' ratings could be raised to the level of the sovereign. Should the exchange offer not be accepted, Uruguay's long-term sovereign credit rating would remain at 'CC' with a negative outlook. In this scenario, if the financial system's situation retains its current stability, banks' ratings will remain unchanged. ANALYSTS: Carina Lopez, Buenos Aires (54) 11-4891-2118 CITIBANK N.A.: S&P Revises Outlook on Currency Credit Ratings ------------------------------------------------------------- Standard & Poor's Ratings Services said Wednesday that it revised its outlooks on its long-term local and foreign currency credit ratings on Uruguayan banks to stable from negative. Standard & Poor's also affirmed its 'CCC' long-term local and foreign currency credit ratings on Banco Bilbao Vizcaya Argentaria Uruguay S.A., Discount Bank Latin America S.A., Citibank N.A. (Uruguay Branch), and American Express Bank (Uruguay) S.A. The stable outlook reflects Standard & Poor's expectations that the recently announced exchange offer to holders of Uruguayan government bonds will not have a negative affect on the rated financial entities. "The previously highly volatile financial environment in Uruguay appears to have stabilized and the rated entities are in comfortable liquidity positions," said credit analyst Carina Lopez. As Standard & Poor's considers the transaction proposed by the government to be a distressed exchange, if the exchange offer is successful, Standard & Poor's will lower the republic's sovereign rating to selective default ('SD') and the exchanged bonds will be rated 'D'. If the new offer closes (on or around May 21, 2003), Standard & Poor's will consider the 'SD' to be cured and the long-term sovereign credit ratings on Uruguay could be raised to the low 'B' category, reflecting a forward-looking assessment of the republic's creditworthiness. In this scenario, banks' ratings could be raised to the level of the sovereign. Should the exchange offer not be accepted, Uruguay's long-term sovereign credit rating would remain at 'CC' with a negative outlook. In this scenario, if the financial system's situation retains its current stability, banks' ratings will remain unchanged. ANALYSTS: Carina Lopez, Buenos Aires (54) 11-4891-2118 DISCOUNT BANK: S&P Affirms `CCC' Currency Credit Ratings -------------------------------------------------------- Standard & Poor's Ratings Services said Wednesday that it revised its outlooks on its long-term local and foreign currency credit ratings on Uruguayan banks to stable from negative. Standard & Poor's also affirmed its 'CCC' long-term local and foreign currency credit ratings on Banco Bilbao Vizcaya Argentaria Uruguay S.A., Discount Bank Latin America S.A., Citibank N.A. (Uruguay Branch), and American Express Bank (Uruguay) S.A. The stable outlook reflects Standard & Poor's expectations that the recently announced exchange offer to holders of Uruguayan government bonds will not have a negative affect on the rated financial entities. "The previously highly volatile financial environment in Uruguay appears to have stabilized and the rated entities are in comfortable liquidity positions," said credit analyst Carina Lopez. As Standard & Poor's considers the transaction proposed by the government to be a distressed exchange, if the exchange offer is successful, Standard & Poor's will lower the republic's sovereign rating to selective default ('SD') and the exchanged bonds will be rated 'D'. If the new offer closes (on or around May 21, 2003), Standard & Poor's will consider the 'SD' to be cured and the long-term sovereign credit ratings on Uruguay could be raised to the low 'B' category, reflecting a forward-looking assessment of the republic's creditworthiness. In this scenario, banks' ratings could be raised to the level of the sovereign. Should the exchange offer not be accepted, Uruguay's long-term sovereign credit rating would remain at 'CC' with a negative outlook. In this scenario, if the financial system's situation retains its current stability, banks' ratings will remain unchanged. ANALYSTS: Carina Lopez, Buenos Aires (54) 11-4891-2118 ================= V E N E Z U E L A ================= * Venezuela Plans Reduction of Private Debt Placement ----------------------------------------------------- Venezuela's Finance Ministry agreed with the central bank and commercial banks to reduce private placements of government debt. El Universal reports that the decision is part of the financial institutions' plan to lower interest rates. Under an agreement, signed on Wednesday, the Finance Ministry will divulge to banks how much debt it plans to place privately each quarter. Last year, the government privately placed about 60 percent of its pubic debt, which tallied about US$3.12 billion. Earlier, investors expressed concerns that the government may not be able to meet its financial obligations following a strike that almost totally disabled its main source of revenue. However, concerns are eased as recent reports indicate that the country will regain its income, almost half of which comes from taxes and royalties on oil. State oil company, Petroleos de Venezuela, S.A. (PdVSA), has almost completely regained its pre- strike production levels. *********** S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter Latin American is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ, and Beard Group, Inc., Washington, DC. John D. Resnick, Edem Psamathe P. Alfeche and Oona G. Oyangoren, Editors. Copyright 2003. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is $575 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. * * * End of Transmission * * *