Compania Cervecerias Unidas, S.A.

Good day, everyone, and welcome to CCU's third quarter 2023 earnings conference call on the 9th of November. Today's conference call is being recorded. At this time, I would like to turn the conference over to Claudio Lazzaras, the head of investor relations. Please go ahead, sir.

Welcome, everyone, and thank you for attending CCU's third quarter 2023 conference call. Today with me is Mr. Felipe Duvernet, chief financial officer. You have received a copy of the company's consolidated third quarter 2023 results. Felipe will now review our overall performance, and we will then move on to a Q&A session. Before we begin, as usual, please take note of our cautionary statement. Statements made in this call 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 the performance or results to materially differ. This statement should be taken in conjunction with the additional information about risks and uncertainties set forth in CCU's annual report in our 20F form 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 Lubernet.

Thank you, Claudio, and thank you all for joining us today. During the third quarter of 2023, CCU continued making progress to recover financial results and profitability in a challenging and volatile economic environment. The latter is shown at the operational level, increasing consolidated EBITDA by 27.7% and improving 269 basis points EBITDA margins. The performance of the quarter shows that the path to improve our profitability under the regional plan Hercules is moving forward. However, stronger efforts are needed in a context of economic disacceleration and volatility in exchange rates and commodity prices. This drives us to focus on the pillars of Hercules. First, maintain business scale, strengthening revenue management efforts, deliver efficiency gains through our transformation program, optimizing CapEx and working capital, focusing on core brands and high volume margin innovations, and continue investing in our brand equity. In quarter three, 2023, our revenues expanded 0.4%, explained by 5.1% increase in volumes, more than offset by a 5.7% decrease expansion in average prices in Chilean pesos. Lower volumes were caused by weaker consumption in Chile and Argentina and worse weather, especially in Chile, while holding market share and a contraction in wine exports. The higher average prices in Chilean pesos were a consequence of revenue management efforts across all our operating segments. Gross profit jumped at 8.9% and gross margin rose 362 basis points, the later explained by the higher average prices and flat average cost of goods sold versus last year. NS and DNA expenses increased 2.9% and the percentage of net sales grew 94 basis points, mainly as a consequence of higher marketing activities, the later to keep enhancing brand equity. In all, EBITDA reached 86,344 basis points Up by 37.7%. Net income dropped 44.9%, totalizing a gain of 9,499 million chilean pesos. during the quarter. And second, $8,665 million of non-recruiting expenses related with the integration of the route to market of our JV in Argentina with our Danones into our beer and cider operation. In terms of cash generation, We deliver another robust quarter. That of September, 2023, net cash inflow from operating activities totalized 205,681 million Chilean pesos versus the negative cash inflow of 21,871 million pesos. In 2022, wide net cash outflow from industrial activities reached 111,051 million Chilean pesos, decreasing from the 175,168 million Chilean pesos during the same period in 2022. In addition, we have decreased our portfolio complexity and recorded strong brand equity indicators, being key to hold back the share in our main categories. In the Chile operating segment, Our top line expanded 5.1%, explained by 4.7% decrease in volumes being more than offset by 10.2% growth in average prices. The higher average prices were explained by a robust revenue management initiative that we have taken from end of last year. Lower volumes were explained by challenging consumption environment along with unfavorable weather, although in line with the industry as market share remained stable. Gross profit expanded 17.4% due to top line performance and lower cost pressures. MS and DNA expenses were 12.3% higher and as a percentage of net sales grew 237 basis points, mostly due to higher marketing activities. In all, EDIPTA reached 52,618 million Chilean pesos, growing 38.7%, and EDIPTA margin increased 320 basis points. In international business operating segments, which includes Argentina, Bolivia, Paraguay, and Uruguay, net sales recorded a 2.4 percent contraction in Chilean pesos as a result of 4.3% drop in volumes, partially offset by 2% increase in average prices in Chilean pesos. Volumes were negatively impacted by a weaker consumption environment in Argentina, partially compensated by volume expansion in all the other geographies. Gross profit expanded 1.1%. MS and DNA expenses decreased 6% and as a percent of net sales, improved 167 basis points due to efficiencies, compensating high inflation and other cost pressures, especially in Argentina. Altogether, EBITDA reached 25,785 million Chilean pesos, a 30.2% expansion from last year. The wine operating segment continues facing a tough business environment during the quarter. Revenues were down 4.7%, mostly explained by a 17.3% contraction in volumes, while average prices increased 3.1% due to revenue management in the domestic market partially compensated with negative mixed effects. The lower volumes was explained by both a 14.4% fall in exports from Chile and a 14.8% drop in the Chile domestic market. Gross profit dropped 8.1% but gross margin improved 296 basis points due to higher average prices and a decrease in cost per liter due to a more favorable cost of wine. MS and DNA expenses were flat versus last year and as a percentage of net sales increased 429 basis points associated with a lower business scale. In all, EBITDA reached 11,606 million chilean pesos, a 21.2 contraction. In terms of our main JVs and associated business, in Argentina, volumes of our water business decreased low double digits, mainly impacted by a challenging consumption environment. Also, we successfully continued with the route to market integration of this business. Finally, in Colombia, volumes contracted . Now, I will be glad to answer any question you may have.