Compania Cervecerias Unidas, S.A.

Good day, everyone, and welcome to CCU's second quarter 2025 earnings conference call on the 7th of August, 2025. Please note that today's call is being recorded. At this time, I'd like to turn the conference call over to Claudio Lazeras, the head of investor relations. Please go ahead, sir.

Welcome, and thank you for attending CCU's second quarter 2025 conference call. Today with me are Mr. Felipe Duvernet, Chief Financial Officer, Mr. Joaquin Perejo, Financial Planning and Investor Relations Manager, and Ms. Carolina Burgos, Senior Investor Relations Analyst. You have received a copy of the company's consolidated second quarter 2025 earning release. The call will start by reviewing our overall results And then we will move on to a Q&A session. As usual, before we begin, please take note of the following statement. The statements made in this call that relate to CCU's future financial results are forward-looking statements, which, of course, involve known and unknown risks and uncertainty that could cause actual performance or results to materially differ. This statement should be taken in conjunction with the additional information about risk and uncertainty 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 CMS and available on our website. For today's conference, As we stated in our second quarter 25 financial report, annual variations and references regarding EBITDA and net income exclude the non-recurring gain from the sale of a portion of land in Chile in the second quarter 2024. Also, organic variations to which we will refer next, exclude the consolidation of PABO in Argentina and ADE in Paraguay. For more details to this, see footnote 3 of our second quarter 25 financial report. It is now my pleasure to introduce our CFO, Mr. Felipe Duvernet. Thank you, Claudio, and thank you all for joining the call today. In the second quarter of 2025, CCU delivered high financial results and increased profitability versus last year, despite the volatile and challenging business environment. Consumidated EBITDA nearly doubled versus last year, mainly driven by our main operating segment, Chile, which expanded EBITDA 59.1% and, to a lesser extent, by the 8.3% growth in the wine operating segment. On the other hand, we keep facing a challenging scenario in Argentina, impacting the international business operating segment's results. Higher consolidated EBITDA and improved EBITDA margin were driven by volume growth, revenue management efforts, and efficiency, more than a set of In line with the higher operation results, net income posted a lower loss versus last year. Our first half results show that we are taking the right actions to keep delivering higher financial results and profitability in the context of soft volume trends for leveraged industry in the region. For the second half, we will keep executing our 2025-2027 strategic plan and its three pillars, profitability, growth, and sustainability, with a special focus on profitability supported by both revenue management efforts backed by strong and diversified portfolio brands and efficiencies across all our operating segments. Regarding our main consolidated figures in the second quarter, organic net sales, went up 4.8%, explained by 4.7% higher organic volumes, while organic average prices were flat. Gross profit grew 6.7% organically, and gross margin expanded 73 basis points. In addition, consumption of MS and DNA expenses grew 5.8%. mainly due to the consolidation of Aguas de Origen in Argentina, although as a percentage of net sales improved 197 basis points. Without the consolidation of Aguas de Origen, that we started the consolidation 1st of July last year, NFM DNA expenses would have increased 0.5%. In all, EBITDA expanded 97.1% and EBITDA margin expanded 150 basis points. In terms of our segments, in the Chile operating segment, top line expanded 9.4% as a result of 6% increase in average prices and 3.2% higher volumes, where all categories posted positive view growth. with a better seasonally adjusted volume space than previous quarters. Increased average prices were explained mainly by revenue management efforts, more than accepting negative mix effects and were key to expand gross profit and gross margin by 12.5% and 115 basis points respectively. In the context of cost pressure related to an unfavorable packaging mix and higher manufacturing costs mainly associated with our PPP recycling plant circular. MSM DNA expenses grew below inflation, expanded 2.1%, and as a percentage of net sales, improved 265 basis points due to efficiencies. Altogether, EBITDA increased 59.1% and EBITDA margin expanded 339 basis points. In international business operating segment, organic volume posted a 9.8% expansion, although net sales recorded an 11.4% contraction, driven by 19.3% lower organic average prices in Chilean pesos. The decline in organic average prices was mainly due to the devaluation of the Argentine peso against the U.S. dollar. and also due to a challenging pricing scenario in Argentina. The volume expansion was mainly strained by a low comparison base in the second quarter 2024 in Argentina, while volumes seasonally adjusted continue in a recovery trend for the fourth consecutive quarter. Organic gross profit increased 11.6% and organic gross margin was flat. MS&D&A expenses were up 10.5% mainly due to the consolidation of ADO and higher marketing expenses. As a percentage of net sales, MS&D&A expenses decreased 301 basis points. Without the consolidation of ADO, MS&D&A expenses would have decreased 5.9%. In all, in spite of volume growth, given the effects mentioned above, A vista loss was similar to last year. The wine operating segment posted a top-line expansion of 6%, mainly driven by a 4.2% rising volumes and 1.7% higher average prices. Larger volumes were led by a 17.4% growth in exports, partially offset by a 4.1% decrease in the Chilean domestic market. while the industry posted a larger decline. The higher average prices were mostly explained by the weaker CLT and its further impact on export revenues and revenue management initiatives in domestic markets, compensated by negative mixed effects in the portfolio. Gross profit was flat and gross margin deteriorated by 222 basis points due to cost pressures from a higher cost of wine due to a lower harvest and higher USD linked packaging costs. MSN DNA expansions dropped 3.7% due to efficiencies and as a percentage of net sales improved to 274 basis points. EBITDA increased 8.3% and EBITDA margin was up 32 basis points. Regarding our main JV and associated business in Colombia, we deliver low single digit volume growth in a soft industry context. We continue working in strengthening our brand portfolio and sales execution to deliver sustainable growth in volumes and results in Colombia. Now, I will be glad to answer any questions you may have.

Thank you. We'll now be moving to the Q&A part of the call. If you'd like to ask a question, please press star two on your phone. That is star two. And if you're dialed in by the web, you can type your question in the box provided or request to ask a voice question. We'll wait a few moments for the questions to come in. Okay, so our first question is from Felipe Ucros from Scotiabank. Your line is now open. Please go ahead.