Compania Cervecerias Unidas, S.A.

Good day, everyone, and welcome to CCU's second quarter 2023 earnings conference call. Please note that today's conference is being recorded. At this time, I would like to turn the conference over to Claudio Laceras, the head of investor relations. Please go ahead, sir. Thank you.

Welcome, everyone, and thank you for attending CCU's second quarter 2023 conference call. Today with me are Felipe Duvernet, chief financial officer, and Joaquin Trejo, Financial Planning and Investor Vision Manager. You have received a copy of the company's consolidated second quarter 2023 results. Felipe will now review our overall performance, and we will then move on to our Q&A session. Before we begin, please take note of a cautionary statement. A statement made in this call that relates to CCG'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 magically differ. This statement should be taken in conjunction with additional information about risk and uncertainty set forth in CCU's annual report in Form 20F filed with the U.S. Securities and Exchange Commission and in the annual report submitted to the CMF and available on our website. It is now my pleasure to introduce Mr. Felipe Duarte. Thank you, Claudio, and thank you all for joining us today. During the second quarter of 2023, CCU post a strong set of results in a tough economic environment, expanding consolidated volumes by 4.8% and EBITDA by 45.1% from last year. The growth in volumes and EBITDA was 6% and 96.2% respectively when we exclude the wine operating segment, which is facing a particularly challenging scenario due to a sharp decrease in export volumes, in line with the Chilean wine industry. The performance of the Quartet shows that our efforts and initiatives to recover our profitability, framed under the Regional Plan Hercules 2023, are in the right path. However, We are aware that more efforts are needed in order to consolidate this positive trend. Accordingly, looking ahead, we will continue focusing on the six pillars of ERCUMES 2023. Number one, maintain business scale. Number two, strengthen revenue management efforts. Number three, enhance the CCU transformation program to deliver efficiency gains. Number four, optimize capex and working capital. And number four, focus on core brands and high volume margins and innovations. And six, continue investing in our branding. In quarter two, 2023, our revenues expanded 2.8%, boosted by 4.8% rise in volumes, while average prices in Chilean pesos contracted 1.9%. The expansion in volumes in the quarter allowed us to be on track to maintain business scale in 2023, in line with pillar number one of Hercules. The lower average prices in Chilean pesos were largely explained by the negative translation effect in Argentina, although in local currency involved in line with inflation. And in the Chile operating segment, average price grew high single-digit during the quarter in spite of negative mixed effects. Gross profit jumped 10.7% and gross margin improved from 40.3% to 43.4%, the latter driven by the higher revenues but also associated with more favorable costs in relevant packaging materials and the appreciation of the Chilean pesos versus the US dollar impacting positively our US dollar denominated cost in line with pillar number two of Hercules. MSM DNA expenses increased 3.6% versus last year, and as a percentage of net sales were practically flat due to efficiencies through all our operating segments, in line with pillar number three of Hercules. In all, EBITDA was up to by 45.1% and net income totalized a loss of 3,943 million Chilean pesos versus a negative result of 10,455 million Chilean pesos last year. Additionally, in Q2 2023, we kept delivering a strong cash generation versus 2022. Thus, As of June 2023, net cash inflow from operating activities expanded, and net cash outflow from investing activities decreased during the same period, in line with pillar number four of RQS. In addition, we reduced our portfolio complexity and recorded strong brand preference indicators, being key to gain or maintain market share in our main categories, in line with pillar number five and number six of RQS. In summary, consolidated volumes increased 4.8%, driven by a 4.7% expansion in the Chile operating segment, and an 8.1% growth in international business operating segment, partially compensated by a 13.4% contraction in the wine operating segment. Net sales were up 2.8%, and gross profit increased 10.7%. Consolidated EBITDA reached 47,126 million Chilean pesos, a 45.1% increase. A big variation in the operating segment was as follows. An 86% jump in our Chile core operating segment, a 74.9% expansion in the international business operating segment, and a contraction of 44.5% in the wine operating segment. Finally, as I said, we have an increase in our results at net income level. Now I will be glad to answer any question you may have.

Thank you very much for the presentation. We'll now be moving to the Q&A part of the call. We acknowledge all the questions already in the queue. If you have any additional questions, please press star 2. That's star 2 on your keypad and wait for your name to be called. You may also ask a voice or a text question if you have dialed in via the web. We'll now give a moment or so for the questions to come in. We'll take the first question from Mr. Felipe Ucos from Scotiabank. Please go ahead, sir.