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.

Operator, good morning, everyone, and thanks for the space. A couple on my end. So the first one is on the pricing in Argentina. Can you delve a little deeper into your pricing comments? You know, you talk about a difficulty in pricing. So just wondering if you can talk about whether this comes from the competitive environment with lack of discipline, or perhaps it's just the state of the consumer that's keeping you from increasing prices faster and on pace with inflation? And then the second one is on SG&A in Argentina. Operating leverage seemed to drop pretty strongly this quarter, particularly when you compare it to the last three quarters since you acquired Agua Zeligen. So, you know, third quarter of last year, which was, you know, seasonally speaking, kind of similar, also winter, your SG&A was close to 50% of sales, but this quarter it was closer to 66%. So pretty stark difference from one year to another. Perhaps the pricing issue has to do with it, but just wondering what the drivers are on that deleveraging case. Thank you.

Hello, Felipe. Good to hear about you. So the first thing, that was key, the pricing. At the end of the day, pricing has been very difficult in Argentina, especially in the last, I would say, six months. To give you a reference, last year, year price in Argentina was, compared to inflation in 2024, above inflation by 4.4%. However, this year, year today, is below inflation by 10.5%. So, if we take into account where the new government took office in Argentina, let's say the period of 18 months since 1st January, 2024, our prices in Argentina are 6% below inflation. As you know also, wages are lagging, real wages in Argentina are lagging below inflation. This is expected because at the end, the main target of the government is to reduce inflation. So consumer has less Argentinian pesos in its wallet. Argentina is expensive right now. a change that at the end of the day for the future is for good to reduce inflation in Argentina. Also the good news in Argentina after the announcement of the government mid April is that we have a new chain rate policy, let's say. So this is what is affecting overall the industry. Also competition is aggressive because when volumes are difficult to recover. So maybe the good sign is that for the fourth consecutive quarter, seasonally adjusted, our volumes are growing. However, also we have had mixed effect as the mixed participation of value brands are higher than before. And this has also to do with this deflationary pressure, I would say, in Argentina. So it's very clear that our prices in this period are below inflation. As far as the economy recovering in Argentina in the future, maybe also a further reduction on inflation, our prices would be in a more healthy perspective. Regarding the synergies, of the water business, no, the synergies are there, because at the end, of course, at total expenses level, of course we have in our P&M the expenses of other. There are marketing expenses, because these are completely allocated to the category. There is more distribution cost, of course, but also we have, let's say, we are only owners of the 51% of the company. So we have a benefit there because we charge out of, we say, so the interest that you need to look. But at the end, you have more marketing expenses because we didn't have this. But the good indicator, and this is why we did the pro forma, is that if you exclude ADO, the consolidation ADO, our MS and DNA expenses have decreased 5.9% and a percentage of net sales. And this is what is very important because in a scenario where you have high inflation and difficulties to prices, our MS and DNA expenses organically decrease 300 basis points. This is the key indicator. So, of course, the volumes were disappointing in terms of what we expected as recovery, but what was more difficult was the pricing scenario, Felipe.

Now, understood. That's very clear. And if I can do a follow-up, you know, on the other side, on Chile, you had very good results on gross margins. Wondering if you can discuss more what was the key driver here on the expansion of growth margins in Chile? Of course.

I think, okay, yes, Chile. Thank you for the, that you noticed that Chile, we have had good results. In fact, I think, we think we have had good results in Chile, not only overall, but in all categories. Let's say beer, non-alcoholic, and also spirit. This is, first of all, this is, as always we did the commentary on that, our brand equity is very strong in Chile. So our pricing power, so because increasing in this context, the prices 6%, this is real average prices. It's not mixed effect. It's real average prices. This is much above inflation. And at the same time, we have maintained overall market share and recovering market share, especially in alcoholic products, against previous quarter. So this sounds a good equation, I would say. Increasing prices, recovering market share in alcoholic products, we posted in overall alcoholic products low single digit growth where competition have had negative growth so in a very difficult industry as I mentioned last quarter in alcohol beverages and this is based on sound brand equity so I along with This good equation, top line, I would like to say also a good effort in efficiency, especially in logistics. So overall, it's a good quarter in our core operating segment, which is Chile.

Thanks. Thanks a lot for that.

Thank you very much. Our next question is from Vidi Vida from Goldman Sachs. Can you give guidance for the second half of 2025 profitability and revenue expectations? Can you share color on the free cash flow you expect to generate this year after interest, tax, networking capital, capex, etc.? ?

Okay. Thank you, Vivi, for your question. First of all, we don't do forward-looking estimates, so I cannot answer your question. On top of that, it's very volatile. U.S. dollar is volatile, the exchange rate. So we have had at the beginning of a month ago, U.S. dollar was at 940. We experienced 5% devaluation. So it's very volatile. Consumption, as I mentioned in my previous answer, especially for Chile, seems to be low single digit, but we need to wait. Pricing scenario has been favorable so far, but we don't know, of course, we don't know how competition would seem to be. So I cannot give you a guidance on that. a more precise canvas. Now regarding free cash flow, yeah, we have a very good equation on operating cash flow, not only because we increase our EBITDA, but also in working capital, thanks to investor reductions, thanks to initiatives, because efficiencies You can look at efficiencies on the one hand in expenses, in cost, but also in working capital. So we are implementing a new planning platform. We do have a new logistic and planning process. So that is delivering its fruits. So as a consequence, we experience inventory, daily inventory reduction, also good work accounts receivables, on receivables by the team. Also, in this particular quarter, we changed our operating model with Red Bull, which allow us to free up extra cash flow. In terms of CAPEX, we are a little bit behind the facing of the estimate we published in the 20F, that we could find in the 20F. but that was more than compensated by this excellent working capital result.

Thank you. Our next question is from Kevin Cheng from Western Asset Management. Your line is all open. Please go ahead. Hello, Kevin. Your line is all open. Perhaps you can... Okay, looks like Kevin dropped. We'll move on to the next question. Our next question is from Lucas Tejeda from JP Morgan. Your line is now open. Please go ahead.

Hello, everyone. Hope you can hear me. My first question is on... Yeah, perfect. My first question is on your expectations on COGS for the rest of the year. There was a Important drop in aluminum prices right in the beginning of the second quarter. Wondering if some of these already was reflected in this quarter's results or if you expect that drop to be something in favor of the company in the third quarter. And then, you know, if you can comment a little bit, especially in Chile, how you see the your expectations. So you had an important improvement in margins year over year in 2Q. If that's still the case for the second half, second half of last year, especially in the fourth quarter, right, company had a good improvement in profitability. If you think this is offering tough comps for you, or if you're comfortable to, once again, especially in the fourth quarter, reach the near 20% margin in 2Q, in Chile.

Thank you very much. We are seeing a little bit higher aluminum prices, as you mentioned, 5% more than last year, so at $3,500 per ton. So we are not seeing, and as we don't have, we prefer to be cautious on that, especially given the trade discussions that the US government is having with China, Brazil, and other countries. There are other raw materials that are in a better shape, let's say sugar, reducing 14% compared to last year so far, and somewhat also barley reducing 60% compared to last year. So we are seeing more rather a stable price going forward. On the other hand, We are a little bit worried about, as I mentioned in my previous answer, to the U.S. dollar because it's around 970 last. So it's and for the quarter it was 933 for the entire quarter too. So now we are facing U.S. dollar pressure. Towards the end of the year, you know, margin will depend a lot on how we sustain our prices. And I would say that finals are positive because second quarter was very, very encouraging. We are in a best ever brand equity levels in all categories with our surveys. So consumer are preferring five prices our products. So at the end of the day, this is a sound foundation of the business. So what will happen, as I mentioned in my previous answer, I will not give you a forward looking view, but if we sustain this level of prices, we have, of course, some pressures given the recent devaluation of the Chilean pesos. But the volumes we maintain, what I, the commentary I made, I think we are growing low single digit, the volumes. So we could have a good second half.

Perfect.

Thank you very much. Thank you. Our next question is from Horacio Herrera from MBI Inversiones. How do you see the situation in Argentina? Is there any green shoot in terms of profitability?

Thank you, Horacio. I think, I know I prefer to have interaction, but It seems that I have answered the question. So we are facing a difficult crisis scenario. Argentina is in a deflation mode. If it continues to trend, I think it's something that Argentina has to do, let's say, reduce inflation levels. Because, I don't know, two or three years ago we had hyperinflation. We increased prices, volume didn't suffer. but we couldn't get dividend from this operation and now we are in a moment of change so the green spot as I think you are asking a question is this new macroeconomic program achieved to a good end would be good in the long term for our business we have solid foundation in Argentina in terms of brand preference, completely aligned with our market share position. We have a good operation that is making efficiencies. We incorporate a new, more scale, adding the water, the Aguas de Origen water business. So for the long term, I saw if The macroeconomic plan in Argentina works and the country has more investment and seen a better future. Now we are in the middle of the transition from a hyperinflation economy to a deflation. And of course our P&L is suffering because it's difficult with the consumer where the salaries are lagging inflation to further increase prices. Also, competition is aggressive, but as I said, the things that are under our control is the brand equity and the good work we are doing there.

Thank you. Our next question is from Ewald Stark. Your line is now open. Please go ahead.

Hello, everyone. Thanks for taking my question. I saw that exportation volumes increased by 14% year over year. So I was wondering what do you expect going forward? Do you still expect volumes to increase by double digits given that you are taking an active approach and opening distribution channels? Hello?

We are pushing the mute and mute button. This is why I didn't answer quickly. So yes, while our main priority in the export business was to recover scale, remember we have a terrible with the global of inventory. And this is, I would say, it's a very encouraging quarter. where our volumes grew by 17.4% with very good performance in Japan, Brazil, and South America, while the U.S. market continues to be very complicated. Going forward, we expect, let's say, for the overall year to continue the recovery we did in 2024. And let's say something like mid single digit growth in our exports. But the second quarter was very good. Also above our expectations somewhat. So as I mentioned in other business was below our expectations. the volume in Argentina, but on the other hand, export of wine was above our expectation. This is the multi-category, as I said, there are some business that we do good performance, some business we do, this is why CCU is a leading multi-category company, in order to have a good diversification.

Okay, perfect. Thanks.

Thank you. Our next question is from Alvaro Garcia from BTG. Can you comment on the dynamics of beer versus soft drinks in Chile? Thanks.

No. Both categories have practically the same growth, low single-digit growth. I would say beer and non-alcoholic. In the case of spirits, we have a very solid growth because we are the market leaders in the new, trendy categories such as ready-to-drink with our Mistralize brand. We are a sound leader there. Both were in line in terms of low single digit growth. In the case of beer also, outspacing our market share in quarter two of what we had in quarter one. So with a good market share recovery in beer across all the brands. So that was good. In the case of non-alcoholic, we grew low single digit. Despite an unfavorable mix for us, as colas continue to take more of the whole non-alcoholic beverage or within soft drinks, colas where we are not the market leaders are taking more portion of the mix. But this has been a trend since the pandemic. However, our Pepsi brand continues to gain brand equity, which is important to compete against the market leader in cost. But despite all of this, we experience this in a very competitive, by the way, scenario in non-alcoholic, also in beer. But in non-alcoholic that usually that sometimes is more rational has been very competitive in the last quarters.

Thank you. Our next question is from Constanza Gonzalez from Quest Capital. Your line is now open. Please go ahead.

Hello, everyone. Thank you, Felipe, for taking my question. I have two. The first one is in relation with Argentina. You said before that you cannot give us a guidance for the year, Could you give us more details about the prices of inflation in the month of July? And also, just to clarify, in the short term, the priority of the company is to keep the market share in Argentina instead of increase the profitability? Thanks. Yeah.

Thank you, Constanza, for this. Yeah, I mentioned to you that the gap in the last 18 months of the prices in Argentina, in the previous question, that was a 6% low. We expect towards the end of the year to reduce this gap. It will be difficult in the 18 months to be in December this year in line with inflation, especially looking at the salaries evolution in Argentina without losing volume and scale. Argentina for us is a mature business. We don't want to gain share through aggressive promotions. So as I mentioned in the previous question, I think we have our fair share compared to our brand equity, let's say. So answering you, if we maintain our brand equity, we will maintain our share. I think this was the answer to you. So that's it. On the other hand, the water business presented better, I didn't mention, but in the accumulated 18 months, water is just 3% below inflation. This is why soft drinks and non-alcoholic beverages are suffering less in the P&L compared to alcoholic beverages. Because also alcoholic beverages in the past have had more exposure to devaluation of the country. Also, remember another thing that we have had a big shock in terms of devaluation in April. So, if everything continues in the crawling peg, let's say, that the government announced that this is already predicted, let's say, and we expect that inflation levels continue to lower in Argentina. This is the plan of the government. And for the long term, as I said, this is good. Argentina is a special country. Argentina is coming, is getting out. It's not cheap. Argentina is getting out from a hyperinflationary economy to a normal standard economy. And this is the price we are somewhat paying us, the consumers, in order to have a better future.

Thank you, Felipe.

Thank you. Our next question is from Martin Caldente from BTG. He has a few questions. Thank you for taking my question. I wanted to ask how the implementation of the REP law has impacted your operation so far and how you're preparing for the upcoming more demanding targets. What kind of operational and financial implications have you seen and to what extent have you passed these additional costs through to consumer prices? And secondly, How are you currently seeing the outlook of key raw materials such as sugar, fruit pulp, fat, aluminum, and other relevant inputs across your main categories?

Okay, thank you. Again, we have to use this for unmuting the platform. But here we go. I think the second part of the question I already answered. We saw better prices in sugar could pull, especially in sugar. PT is, I would say, is stable. The PT we import from China. Aluminium, I said, we are seeing a $2,500 price stable, let's say. But, as I mentioned, input costs are subject to the U.S. dollar. And this is not a good week for us regarding the U.S. dollar going forward. The first part of the question regarding circular and rest law regarding I will hand over this question to Joaquin Trejo to give you some color on that. Thank you, Felita, and thanks, Martin, for your question. Yeah, the impact of the REV law can be seen in the cost and expenditures associated with our PET recycling plant. Circular, to give you more color on that, in the second quarter, the impact is approximately 3 billion pesos. It is mainly due to two factors. One, the manufacturing expenses, and second, the additional cost of the recycled machine over the building machine. And on a year-to-date basis, it's about 7 billion pesos more or less. And obviously, this is significant impact considering our total scale because we are talking about more or less the 7% of the EBITDA of the Chile operating segment in the quarter. So yeah, definitely. And regarding prices, we think it's difficult to pass this on to consumers. In fact, the prices of the non-alcoholic categories in the second quarter grew in line with inflation. So I would say that passing on this cost to prices is difficult to do So as long as consumers actually don't or do value that. So I would say that, yeah, it's a challenge because prices in non-alcoholic categories in Chile grew in line with inflation in the second quarter, not above or well above inflation.

Thank you. Our next question is from Fernando Olvera from Bank of America. Your line is now open. Please go ahead.

Hi, thanks for taking my question. The two are related to Chile. Regarding the volume performance that we have seen here today, I was just wondering, how does this compare versus your initial expectation at the beginning of the year? And my second question, also related to Chile, is based on the strong pricing that we have seen You know, how your market share has performed on beer so far this year. Thank you.

Hello, Fernando. Nice to hear all of you. So, regarding Chile morning performance, as I said, we grew low signal digits. And year to date I would say we are flat in terms of volumes. Also because the compilation of the first quarter of last year was a little bit high, also the second quarter. But we are cut, but with a good seasonally adjusted trend I would say, or stable. because it's stabilized in the case of beer. So in the last, I would say in the last three quarters, let's say seasonally adjusted industry volumes in Argentina were stable. So of course we have less volume of per capita consumption compared to 2021. Remember you about the withdrawal and the consumption part in Chile, let's say. But so we are seeing a stabilization of the beer volumes. Non-alcoholic, on the other hand, we are seeing a positive trend, seasonally adjusted with a very good, because So the quarter was much better than same quarter last year, even seasonally adjusted, and we continue seasonally adjusted to see better volumes in the last, let's say, four quarters, okay, in the . So in conclusion, I think it's possible who have a low single digit growth in the year, who watch the year. And in the case of a non-alcoholic between, let's say, low single digit and mid single digit, a little bit higher. But this is in the overall equation. On the other hand, we are doing very well in spirits, especially because of the ready-to-drink products. I don't know if I answered your question.

Oh, yes, that's great. And, Felipe, and regarding the market share, no, on the... No, I already mentioned in the previous question about the share.

So, at the end... Sorry, I missed it. All in all, it's stable compared to last year. I would say, stable, which is very encouraging is that it's not stable because it's growing, it's our granite in India. This is why the pricing power we are having.

Okay. Awesome. Thank you.

Thank you. Our next question is from Thiago Bertolucci from Goldman Sachs. Your line is now open. Please go ahead.

Hello, Felipe. Hello, Claudio. Thank you very much for taking our questions. Great to talk to you. I have two, but let me start with Chile, right? When I put together, Felipe, a few of the things that you said, you said stable market sharing here. You said consolidated prices here. moving above inflation with non-alcoholic growing at inflation, right? Which implies you are growing maturely above inflation on beer, right? What is driving this momentum for beer in your view, right? You are growing real prices, still keeping market share. Is this about to do with competition moderating? Is this to do with channel mix? What is your assessment on this? I'll pause here and then I'll have another one in international. Thank you very much.

Yeah, as I know, nice to hear all of you. So as you know, the beer business all over the world has suffered from very high inflation in the last, The driver is our priority in recovering profitability in our businesses. And the category that suffered the most after the pandemic, because of raw materials, because of exchange rate, is beer, particularly beer. So, and the driver is that we have a solid reality. So it's internal driver at the end. in order to increase prices. So we need to recover the profitability we had before the pandemic, and that's clear. So we continue our revenue management efforts, working on our mixers. So the good news is that the mixers has not deteriorated in the last two years, despite having a more soft industry, mixes remain the same. And of course, we have a higher market share in mainstream, lower market share in premium, but despite of this, our market share is almost, it's a saving. Of course, in the first quarter, we lost a little bit market share, but we recovered then in quarter two while increasing prices. So that's a good news, I would say. Did I answer your question?

Clearly. Thank you very much, Felipe. And then, if I may, a follow-up in international. We all understand quite well what's happening in Argentina, right? We know the activity momentum, inflation, all the volatility there. But none of this is new to the story, right? Everything was already in place. in the beginning of the year with one exemption that is clearly the effects, right, that moved a lot. Now, this is more of a conceptual question, right, rather than getting the number. What changes from the first quarter to the second quarter for us to shift into double, well, mid-teens EBITDA margin in the first quarter to negative 20s EBITDA margin in the second quarter. Again, I know, I understand the effects part of this equation, but apart of this, how should we think about the underlying momentum, right, particularly when I compare your performance on a quarter-over-quarter basis? Thank you.

So, our pricing when you compare with inflation, that is related in the second quarter, along with devaluation of the currency. Let me first start with the devaluation, because there is something in the second quarter you need to take into account, and we disclose this in our first release, if you saw. There is a table, which is the exhibit seven, which is the impact of the hyperinflation accounting. And this impacted us a lot. It impacted us around $3 million at the digital level. The impact of the IAS 39, which is the update in the quarter of the first quarter. So the first quarter result is adjusted into the second quarter result. Sorry to mention this. Sometimes it's complex to do. to take into account that, because this hyperinflation accounting is a unique country having that. So this has an impact also in our results. But anyway, despite the accounting matters, let's say, which deteriorated, I think the pace of the recovery slowed down. Although we have a recovery, but it slowed down. The recovery in quarter one was much higher when you compare seasonally adjusted with quarter four. But it seems the consumer has less purchasing power, let's say. Salaries are below inflation. So it is difficult, this thing. Also the needs that are raised in Argentina. That is part of the equation. So we saw, and this trend has, happening between quarter two and quarter one, to be honest. So a lower pace of volume recovery, the gap of pricing compared to inflation wide, wide open, aggressive competition also, but we have to continue to work on efficiencies, on expense control, We think in the coming months, maybe with this good trend in terms of inflation in Argentina, along the consumer recover is purchasing power, there would be a more favorable scenario in order to start to close this gap in terms of pricing Against inflation, yeah.

Well understood, Felipe. Thank you very much.

Thank you very much. Just a reminder, if you'd like to ask a question, press star 2 on your phone. 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 have a follow-up question from Vidi Vida from Goldman Sachs. Can you share color on the health of the consumer in Chile? How are you seeing volumes and pricing evolve in July 2025? Are you in a position to increase prices in the second half of 2025 to maintain and improve profitability?

Thank you.

Yeah, I think the sense of the consumer of cereal, as I mentioned, alcoholic beverages, especially here, stabilize. So it's too early to call how will be the volume. You know, our business is very, it's a very seasonal business, okay? So it's difficult to anticipate quarter four, which is very important. The comes in July because of prices increases of last year, but seasonally adjusted volumes of July were better than quarter two. This is the only thing I can mention, let's say. Seasonally adjusted beer volumes were better than quarter two. In non-alcoholic, also it maintains seasonally adjusted the volume. The July season rain adjusted was in line of in quarter two. So we will continue to see, let's say, this low middle digit growth in non-alcoholic. Okay. Regarding practice scenario, it is a very competitive market. I cannot forecast that. Always if there are opportunities for revenue management, Believe me, we will take them. We'll take them along, see other KPIs, such as , you know, it's not just to say, okay, price, how it's going, we're stable. We haven't seen, you know, something changing on sustaining our prices already achieved. So, A good thing would be, let's say, to further enhance our revenue management, but I cannot commit on that because it's a very competitive market.

Thank you. Looks like we have no further questions. I'll now hand it back to the CCU team for the closing remarks.

Hello everyone to attend this conference call. In summary, in quarter 2, 2025, we almost double-consolidated Evista for a robust expansion in our core operating segment, which is Chile, and a high single-digit Evista expansion in the wine operating segment. As I mentioned, we still face a very challenging scenario in Argentina that for the future we think it is for good, as I said. Revenue management and efficiencies were key to achieve this quarter too. Moreover, we were able to deliver volume growth in all operating segments and core categories in a context of soft industries. To conclude, and I would like to mention that at the end of this call, This is a very symbolic year for CCU as we are celebrating 175 years of history. We continue implementing in this year our 2025-2027 strategic plan, supported in our multi-category strategy and our vast business experience to ensure sustainable and profitable growth for our company. I wish you a wonderful afternoon. Thank you all of you.

That concludes the call for today. Thank you and have a nice day.