Compania Cervecerias Unidas, S.A.

Ladies and gentlemen, thank you for standing by. Good day and welcome to CCU's fourth quarter 2022 earnings conference call on the 1st of March, 2023. Today's conference call is being recorded. At this time, I would now like to turn the conference over to Claudio Lazaras, the head of investor relations. Please go ahead, sir.

Welcome, everyone, and thank you for attending CCU's fourth quarter 2022 conference call. Today with me are Mr. Felipe Duvernet, Chief Financial Officer, and Mr. Carlos Anvanter, Financial Planning and Investor Relations Manager. You have received a copy of the company's consolidated fourth quarter 2022 results. Felipe will now review our overall performance, and we will then move on to a Q&A session. Before we begin, please take note of our cautionary statement. The statements made in this code that relate to CCU's future performance or financial results are forward-looking statements which involve known and unknown risks and uncertainties that could cause actual performance or results to materially differ. These statements should be taken in conjunction with the additional information about risk and uncertainties set forth in CCU's annual report in Form 20-F filed with the U.S. Security and Exchange Commission and in the annual report submitted to the CNF and available on our website. It is now my pleasure to introduce Felipe Duermes.

Thank you, Claudio, and thank you all for joining us today. In 2022, we face a particularly challenging year for the profitability of the business, especially in Chile. Consolidated EBITDA dropped 19.6%, while EBITDA margin deteriorated from 17.9% to 13.2%. Financial results were mainly affected by sharp negative external effects, coming from the depreciation of our main local currencies against the US dollar, and higher prices in raw materials, packaging, and energy, impacting our costs. The latter was partially offset with prices and efficiencies. Net income contracted 14.7%. In spite of the deterioration of our results, I would like to comment on the actions that we took in 2022, which put us in a position to look for profitability improvement in 2023. First, we were able to preserve business scale as volumes decreased 1.1% despite a high comparison base from last year and a weaker consumption environment. Second, we overall kept market share in our core categories. Third, we strengthened our portfolio of brands by reaching a historical brand equity level in our main categories in the region. And fourth, we implemented revenue management initiatives in all our geographies to mitigate cost pressure with prices in line with inflation in our main categories by the end of the year, especially in Chile. All of this will be enhanced this year by the implementation of Hercules 2023, a recovery profitability plan which encompasses six pillars. Maintain our business scale. Second, strengthen revenue management efforts Enhance the CCU transformation program to deliver efficiency gain in cost and expenses. Focalize and optimize CapEx together with optimizing working capital. Focus on core brands and high volume marketing innovation and continue investing in our branding. I would like to mention that by the end of the year, we started to see some positive trends from this, especially in Chile. reflected on prices which expanded in line with inflation and efficiencies in costs and expenses. From a quarterly perspective, in quarter 4, 2022, we continue operating in a tough economic environment which impacted consumption. Top line decreased 6.6%, driven by a 5.5% drop in volumes. However, 10% growth versus Q4 2019 and a 1.1% decrease in average prices in Chilean pesos. EBITDA contracted 21% and EBITDA margin decreased from 18.9% to 16%, the latter mainly associated with the same negative external effects that impacted us during the year. net income fell 36.4%, caused by a lower operational result, as explained, and a greater loss in non-operative results, mainly driven by higher financial expenses due to a larger debt. In terms of our segment, in the Chile operating segment, top line grew 3.6% in Q4 2022. due to a 12.4% growth in average prices, partially compensated by 7.8% lower volumes. However, with growth against Q4 2019, we grew 12.7%. Mostly due, of course, we had a very high comparison base in 2021. EBITDA decreased 24.4% and EBITDA margin decreased from 19.4% to 14.2%. In international business trading segments, which includes Argentina, Bolivia, Paraguay and Uruguay, net sales dropped 27.6%, mainly as a result of a contraction of 26.7% in average prices in CLP, although they increased in local currency in line with inflation, while volumes contracted 1.1%. The growth against quarter 4, 2019, was 4.7%. EBITDA went down 19.7%, negatively impacted by the exchange rate translation effect in Argentina related with hyperinflation accounting. In the wine operating segment, revenues were up 3.2%, mainly explained by a 5.7% growth in average prices, partially offset by a 2.4% contraction in volumes. 8.4% growth versus Q4 2019. As a consequence, Edipta improved 18.5%. Regarding our main joint ventures and associated business, in Colombia, where we produce and distribute beer and mof with Postobon, Top line growth almost 20% in Chilean pesos in 2022, driven by volumes and average prices. Thus, we continue expanding business scale during the year. In Argentina, our recently acquired water business, where we have a joint venture with Danone, showed strong top line growth led by volumes and higher prices, allowing a recovery in financial results. Both JVs represented 7.4 million hectoliters as of December 2022. Now, I will be glad to answer any questions you may have.